§  | 


'  ; 


.      THE 

NATIONAL 

DEBT,    TAXATION,    CURRENCY, 

AND 

BANKING  SYSTEM 

OF    THE 

U  1ST  L  TED     S  T  A.T  E  8  . 

WITH    SOME    REMARKS 


ilqjort  of  tljc  Secretari)  of  tljr  Srrasuru 


dversity  of 
Southern  Rt 
Library  Fa 


BY     JAMES     GALL  A  TIN. 


NEW  "YORK  : 

HU*FORD   <t   KETCH  AM,    STATIONERS   AND    PRINTERS, 
Nos.   57  and  59  William  Street. 

1864. 


THE 

NATIONAL 

• 

DEBT,  TAXATION,    CURRENCY, 

AND 

BANKING  SYSTEM 

OF    THE 

UNITED     STA.TBS. 


•WITH    SOME    REMARKS 

ON    THE 

fff  tjjt  ^tmtarj  af  tlje  fetsarj 


BY    JAMES    GALLATIN. 


NEW    YORK: 

HOSFORD  &  KETCHAM,    STATIONERS  AND  PRINTERS, 

Noi.  57  and  59  William  Strtet. 

1864. 


REMARKS 

ON     THB 

of  ijft  Starefatjj  of  %  tasarg, 


FOR  THE   YEAR    186.3, 
By  James  Gallatin. 


I.  Magnitude  of  the  National  Disbursements. 

THE  annual  report  of  the  Secretary  of  the  Treasury,  dated 
December  10th,  1863,  embraces  statements  of  debt  and  dis- 
bursement far  surpassing  in  magnitude  the  financial  trans- 
actions of  any  nation,  for  the  same  period,  in  modern  times. 
Only  in  the  traditions  of  the  ante-historic  era  do  we  find  a 
parallel  to  the  stupendous  volume  of  national  expenditure 
now  witnessed  at  Washington.  The  nearest  approach  to  it 
during  the  present  era  is  recorded  by  Mr.  Allison,  in  his 
"  History  of  Europe,"  who  states  that  the  expenditures  of 
the  British  nation,  during  1815,  the  last  year  of  their  great 
struggle  with  the  first  Napoleon,  reached  the  sum  of 
£111,000,000  sterling,  about  £38,000,000  of  which  was  raised 
by  loans,  and  £11,035,232  of  it  was  paid  in  subsidies  to  other 
nations.  In  our  own  case  the  disbursements  of  the  fiscal 
year,  1863,  were  $714,709,995,  of  which  $590,266,682  was 
provided  for  by  the  issue  of  paper  money  or  loans.  The 
estimates  for  1864  amount  to  $751,815,088,  of  which 
$544,978,548  is  to  be  provided  for  by  loans.  Assuming 


2003551 


the  pound  sterling  of  Great  Britain  to  be  equivalent  to  five 
dollars  of  United  States  currency,  the  disbursements  of  the 
British  nation,  with  the  sources  of  revenue,  and  those  of  the 
United  States,  would  stand  thus : 

UNITED    STATES  BRITISH 

1863  1864  1815 

Expenditure $714,709,995  $751,815,088  $550,000,000 

Revenue  from  Loans  590,266,682    544,978,548    190,000,000 
"      Taxes,  &c.  124,443,313     206,836,540     360,000,000 

Sums  nearly  as  large  as  these  have  probably  appeared  in 
the  statements  of  the  rebel  authorities  at  Richmond  for 
1863  ;  but  if  they  have  not,  and  if  by  any  chance  the  chiefs 
of  the  rebellion  should  ever  publish  a  statement  for  the  year 
1864,  our  figures  will  probably  be  far  surpassed  in  amount, 
since  flour  is  selling  at  two  hundred  dollars  per  barrel  at 
Richmond,  and  their  financial  affairs,  like  their  unhallowed 
schemes  of  political  ambition,  are  tumbling  rapidly  into 
hopeless  ruin :  that  madness  which  precedes  destruction  con- 
tinues to  hurry  them  on  to  an  ignominious  fate.  Paper 
money  has  proved  to  be  the  winding-sheet  of  the  once 
formidable  American  rebellion  of  the  nineteenth  century. 
If  we  are  wise  we  shall  profit  by  the  folly  of  the  insurgent 
chieftains  in  their  7'elianee  upon  paper  money.  Our  great 
and  glorious  country  needs  no  such  quackery  in  finance  to 
sustain  this  holy  struggle  for  the  preservation  of  the  Union. 
It  is  true  that  our  vast  outlay  causes  much  solicitude  in  the 
public  mind  as  to  the  means  of  providing  for  it,  in  conse- 
quence of  the  natural  tendency  of  so  great  an  expenditure 
of  money  to  create  an  insatiable  greed  of  gain,  with  power- 
ful partizan  organizations  seeking  to  perpetuate  this  lavish 
distribution  among  their  leaders,  regardless  of  the  welfare  of 
the  people  or  the  honor  of  the  nation.  But  there  is  yet  no 
serious  apprehension  of  immediate  embarrassment  in  pro- 
viding for  the  debt  incurred,  or  to  be  incurred,  so  long  as  the 
amount  can  be  kept  at  or  below  two  thousand  millions,  which 


would  be  only  fifty  dollars  to  each  person  of  the  probable 
population  of  the  Union  at  the  next  census. 

II.  Necessity  for  Economy. 

To  economise  our  treasure  by  the  election  to  office  of 
honest,  intelligent,  skillful  and  patriotic  statesmen  is  our 
duty  at  all  times,  but  in  a  time  like  the  present  this  duty 
becomes  of  paramount  importance,  and  it  cannot  be  too 
often  impressed  upon  the  minds  of  the  people,  whose  toil 
and  industry  will  be  heavily  taxed  for  a  generation  or  more 
to  come,  to  provide  the  money  to  pay  the  interest  and  the 
principal  of  our  growing  debt.  We  have  now  to  assume  new 
burthens.  As  a  free  people,  our  principles  of  self-govern- 
ment are  about  to  experience  a  new  test — and  a  severe  one — 
in  the  assumption,  management  and  liquidation  of  a  great 
national  debt,  one  of  the  most  fruitful  sources  of  corruption 
in  a  body  politic,  whatever  may  be  the  form  of  government. 
Next  to  the  economy  of  human  life,  in  conducting  the  war 
it  should  be  the  aim  of  government  and  people  to  secure 
economy  of  wealth  by  the  application  of  the  most  judicious 
systems  of  taxation,  expenditure,  funding,  banking  and  cur- 
rency ;  for  it  is  more  emphatically  true  of  our  own  than  of 
any  former  age,  that  success  in  war,  as  well  as  the  mainten- 
ance of  national  existence,  depends  very  much  upon  the 
financial  resources  of  the  people. 

III.  Onr  Sources  of  Wealth. 

Happily  for  us,  this  crisis  in  our  national  career  came  upon 
us,  providentially,  in  the  midst  of  a  progressive  development 
of  material  wealth,  such  as  no  people  could  have  hoped  to 
enjoy.  Blessed  with  the  natural  resources  of  a  continent 
extending  through  the  temperate  and  into  the  torrid  zone, 
and  fronting  on  the  two  great  oceans  of  the  globe ;  having 
an  active  population,  well  skilled  in  all  the  industrial  pursuits 
distinguishing  modern  civilization  ;  receiving  constant  acces- 
sions of  enterprising  people  from  Europe — the  agricultural 
and  mineral  wealth  of  the  country  yielding  easily  their  vast 


stores  to  the  willing  hands  of  honest  labor — it  was  only 
requisite  that,  with  firm  reliance  upon  the  favor  of  heaven, 
we  should  possess  that  unflagging  patriotism  which  could 
brave  all  dangers  and  suffering  in  defence  of  our  cherished 
nationality.  A  million  and  more  of  brave  men  have  volun- 
teered to  prove  with  their  life-blood  that  we  do  possess  this 
patriotism.  Victory  is  now  perched  upon  our  banners,  and 
in  a  few  months  more  we  may  hope  to  see  the  end  of  the 
most  wicked  rebellion  known  among  mankind. 

But  no  amount  of  resources,  however  enormous,  can  be 
made  available  for  the  support  of  a  nation's  existence,  if 
waste  and  extravagance  and  incompetency  be  permitted  to 
direct  the  affairs  of  state ;  for  a  public  man,  without  skill  in 
his  department,  robs  the  people  and  commits  treason  to  the 
nation  as  effectually  as  if  he  were  in  the  ranks  of  the  enemy, 
by  occupying  a  position  in  which  ignorance  of  duty  becomes 
a  crime  against  the  life  of  his  country. 

IV.  Necessity  for  Skill  in  the  Government— Unusual  Powers  En- 
trusted to  the  Treasury  Department. 

It  has  now  become  a  personal  matter  with  every  man  how 
the  government  shall  be  administered,  for  we  shall  no  longer 
witness,  during  this  generation  at  least,  that  comparative 
exemption  from  taxes  which  has  hitherto  been  the  boast  of 
our  coimtry.  Labor  will  undoubtedly  continue  to  enjoy 
among  us  that  preeminent  distinction  and  those  higher 
rewards  which  have  always  characterized  this  country,  as 
compared  with  those  in  which  the  working  people  have  had 
to  maintain  an  enormous  hereditary  aristocracy  in  addition 
to  heavy  government  taxation.  It  is  not  the  honest  laborer 
who  will  be  called  upon  to  make  up  the  largest  share  of  our 
taxation  for  the  national  debt,  if  we  are  true  to  ourselves, 
but  rather  those  who,  squandering  wealth  upon  extravagant 
luxuries,  have,  by  skillful  devices  fastened  themselves  on  the 
productive  industry  of  the  people  through  the  medium  of  a 
false  monetary  system.  In  the  great  revulsion  of  1836-7, 
when  the  population  was  only  about  half  of  what  it  is  at 


present,  not  less  than  six  hundred  millions  of  dollars  in 
values  was  destroyed,  at  the  expense  of  the  labor  of  the 
country,  through  false  monetary  systems ;  and  if  attempts  be 
made  to  bring  back  such  systems  upon  the  country,  at  a  time 
when  the  burthens  of  a  heavy  national  debt  press  upon  the 
people,  may  we  not  hope  that  the  self-interest,  as  well  as  the 
patriotism  of  the  people,  will  force  those  who  would  specu- 
late upon  their  energies  to  resort  to  more  substantially  pro- 
ductive as  well  as  more  honorable  occupations? 

Of  all  departments  of  the  government,  that  of  the  Trea- 
sury becomes  henceforth  the  most  important  to  the  produc- 
tion, accumulation  and  distribution  of  wealth  by  and  among 
all  classes  throughout  the  country ;  for  with  the  power  now 
in  the  hands  of  the  Secretary  of  the  Treasury,  he  can  make 
wages  high  or  low ;  he  can  raise  prices  or  depress  them ;  and 
he  can  advance  or  put  down  values  of  property,  in  his 
discretion,  by  the  course  which  he  has  it  in  his  power  to 
adopt  in  funding  his  loans,  issuing  his  currencies,  disposing 
of  his  deposits  and  making  his  disbursements.  So  over- 
whelming is  the  power  which  Congress  has  placed  in  the 
hands  of  the  Secretary  of  the  Treasury,  that  it  is  only  the 
great  personal  integrity  of  the  citizen  who  may  fill  that 
situation  which  can  save  the  country  from  most  serious  ap- 
prehensions as  to  the  future  course  of  our  financial  affairs. 
In  the  early  history  of  our  government,  the  power  of  the 
Treasury  Department,  although  much  less  than  it  is  now, 
was  considered  too  important  to  be  made  independent  of  the 
President,  and  hence  the  former  custom  and  usage  of  Con- 
gress, when  authorizing  loans,  to  confer  the  authority  upon 
the  President  of  the  United  States,  and  to  require  his  ap- 
proval of  all  the  powers  entrusted  to  the  Treasury  Depart- 
ment. The  first  act,  changing  this  course  of  policy,  was  that 
of  July  17th,  1861,  and  in  all  recent  acts  of  Congress  the 
power  of  making  loans  has  been  taken  from  the  President 
and  given  to  the  Secretary  of  the  Treasu?'y  alone.  In  his 
present  report  the  Secretary  has  referred  to  further  powers — 
an  unlimited  power  to  receive  deposits,  and  the  power,  under 


8 

the  name  of  "RESERVE,"  to  issue  legal  tender  currency  to 
meet  such  deposits — which  would  make  him  even  more 
thoroughly  the  arbiter  of  the  wages  of  labor  and  the  prices 
of  property  of  all  descriptions  than  he  is  at  present,  if  that 
were  possible.  The  nature  and  extent  of  this  deposit  system, 
and  reserve  of  issues  to  work  it,  will  be  explained  more  fully 
under  another  head.  It  is  mentioned  here  only  to  illustrate 
the  great  and  unusual  powers  already,  or  proposed  to  be, 
conferred  upon  the  Secretary,  and  which,  in  the  hands  of  a 
citizen  less  distinguished  for  his  private  virtues,  would  be 
considered  more  than  exceptional. 

V.  The  Secretary's  theories— their  dangers— he  is  probably  deceiv- 
ing himself  with  honest  intentions. 

Admitting  the  undoubted  integrity  of  the  Secretary  of 
the  Treasury,  it  may  yet  be  possible  that  he  is  deceiving 
himself  with  false  theories  of  money,  currency,  banking, 
taxation,  and  funding;  and  this  seems  the  more  probable 
from  the  unusual  mistakes  into  which,  as  he  partly  states  in 
his  report,  he  lias  already  been  led.  He  mentions  the  case 
of  internal  revenue,  which  has  fallen  so  far  below  the  esti- 
mates he  was  led  to  entertain  last  year.  Another,  which 
he  does  not  allude  to,  was  the  extent  to  which  he  could 
issue  fractional  currency,  and  which  fell  so  enormously  below 
his  expectations.  Again,  as  to  his  circulating  notes,  he  still 
insists  that  they  have  not  been  issued  in  excess  of  the  wants 
of  the  country,  and  still  urges  the  further  issue  of  three 
hundred  millions  of  paper  money,  by  the  proposed  banking 
system  like  that  existing  in  the  state  of  New  York,  advo- 
cating these  as  measures  which  will  tend  to  facilitate  the  re- 
resumption  of  specie  payments  !  It  seems  almost  useless  to 
remark  that  these  theories  of  the  Secretary  are  wholly  at 
variance  with  the  teachings  of  experience,  and  as  wide  of 
the  views  of  intelligent  business  men  as  the  estimates  (over 
eighty-five  millions)  given  to  him  of  his  probable  receipts 
for  internal  revenue,  fell  short  of  the  amount  (not  quite 
thirty-eight  millions)  he  has  received  !  He  has  seen  gold 


rise  steadily  in  price  with  hia  increased  issues.  He  has 
witnessed  the  rise  in  prices  of  other  property.  Yet  he  avows 
the  most  earnest  solicitude  to  keep  the  currency  at  par  with 
gold  !  Unfortunately  for  most  theories,  their  practical 
application  seldom  meets  the  expectations  of  their  advocates, 
and  the  difference  between  the  Secretary's  theory  of  cur- 
rency, and  the  fact,  is  exactly  the  current  premium  on  gold, 
or  about,  fifty  per  cent !  It  is  related  of  the  celebrated  John 
Law,  whose  paper  money  theories  overwhelmed  the  French 
people  in  frightful  calamities,  during  the  last  century,  that 
he  was  himself  so  thoroughly  deceived  by  his  own  theories 
that  when  he  fled  from  the  exasperated  populace  of  Paris, 
escaping  the  missiles  which  smashed  the  windows  of  the 
carriage  he  had  quitted,  he  was  not  able  to  save  from  his 
princely  estates  more  than  enough  to  pay  his  traveling 
expenses,  and  became  in  his  exile  an  object  of  charity. 

Mr.  Chase,  while  advocating  a  further  issue  of  three 
hundred  millions  of  bank  notes  by  his  proposed  new  banks, 
says  of  the  bank  notes  now  in  circulation : 

"Were  these  [Bank]  notes  withdrawn  from  use,  it  is 
believed  that  much  of  the  now  very  considerable  difference 
between  coin  and  United  States  notes  would  disappear." 

This  is  clearly  mistaking  a  secondary  cause  for  a  primary 
one;  and  on  no  subject  is  the  human  mind  so  prone  to 
mistake  secondary  for  primary  causes  than  on  this  subject 
of  circulating  medium.  The  bank  notes  in  circulation  at 
the  time  of  the  breaking  out  of  the  rebellion  in  1860-61, 
were  about  one  hundred  and  fifty  millions  in  the  loyal 
States,  and  in  May  last,  (1863),  they  had  not  exceeded  this 
sum  more  than  twenty  millions  of  dollars ;  so  that  the  cir- 
culating medium,  from  the  bank  issues,  remained  almost 
uniform.  Here  is  our  total  paper  money, by  the  latest  returns, 
with  what  the  Secretary  proposes  to  make  it : 


10 

Legal  tender  notes  in  circulation,        $400,000,000 
Bank  Note  circulation  in  May,  1863,     168,400,000 

$568,400,000 
Proposed  new  bank  issues,  300,000,000 

,400,000 


The  bank  notes  out  previous  to  the  rebellion,  and  still 
continued  in  circulation,  are  payable  on  demand  in  lawful 
money  of  the  United  States.  JSTo  part  can  remain  out  be- 
yond the  demand  of  the  people  for  them,  and  they  would  be 
paid  in  specie,  on  demand,  if  the  United  States  did  not 
furnish  legal  tender  paper  to  pay  them  with.  It  is  thus 
plainly  a  violent  stretch  of  conjecture  to  suppose  that  exces- 
sive circulation  is  more  likely  to  arise  from  the  issues  of 
paper  money  constantly  payable  on  demand,  than  from 
those,  the  payment  of  which  is  postponed  to  an  indefinite 
period.  The  circulation  of  bank  notes  must  necessarily  be 
proportioned  to  the  quantity  of  United  States  notes  requisite 
to  cash  those  which  may  be  presented  for  payment.  But 
'the  legal  tender  paper  of  the  United  States  has  no  such 
limitation ;  it  is  the  ultimate  element,  unto  which  the  whole 
paper  circulation  of  the  country  resolves  itself,  whether 
issued  by  existing  banks  or  by  the  new  national  banks  now 
being  established.  United  States  legal  tender  paper  is  the 
great  source  of  all  the  paper  money  circulating  throughout 
the  country;  and  by  the  increase  or  diminuation  of  legal 
tender  paper,  the  increase  or  decrease  of  the  circulating 
notes  of  every  bank  in  the  country  is  governed,  by  the 
irresistable  laws  of  trade.  The  rise  in  prices  occasioned  by 
the  circulation  of  bank  notes  can  only  operate  as  a  secondary 
cause.  That  rise  which  is  caused  from  an  excess  of  United 
States  legal  tender  notes  is  a  radical  and  primary  cause 
which — as  it  alone  has  produced  or  can  produce  any  impor- 
tant effects  on  the  general  circulation  of  the  country — can 
alone  create  a  rise  in  prices.  These  principles  are  so  plain 


11 

that  even  the  Secretary  has  admitted  them,  and  contradicted 
himself,  since  he  expressly  states  that  the  influence  of  the 
legal  tender  paper  upon  prices  of  commodities  is  "  almost,  if 
not  altogether,"  the  same  as  a  circulating  medium  composed 
of  the  precious  metals.  He  gays :  "It  is  an  error  to  suppose 
that  the  increase  of  prices  is  attributable  wholly  or  in  very 
large  measure  to  this  circulation  [United  States  legal  tender 
notes].  Had  it  been  possible  to  borrow  coin  enough,  and 
fast  enough,  for  the  disbursements  of  the  war,  almost  if  not 
altogether  the  same  effects  on  prices  would  have  been 
wrought." 

If,  therefore,  "the  same  effects  on  prices  would  have  been 
wrought "  by  the  disbursement  of  coin,  which  every  person 
admits  would  have  produced  a  rise  in  prices,  how  is  it  "an 
error  to  suppose  that  the  increase  of  prices  is  attributable 
wholly  or  in  very  large  measure  "  to  the  legal  tender  notes, 
which  were  employed  to  take  the  place  of  coin  ? 

Such  are  the  mazes  of  contradiction  in  which  theories  of 
paper  money  constantly  entangle  their  devotees.  In  his 
theory  of  banking,  and  in  his  plans  for  enforcing  "uniform- 
ity" in  the  paper  circulation  throughout  the  country,  he  is 
equally  unfortunate ;  but  before  entering  upon  these  topics, 
it  seems  proper  to  glance  at  the  suggestion  which  he  has 
made,  as  to  the  comparative  influence  of  paper  money  and 
coin  upon  prices,  in  connection  .with  the  present  volume  of 
legal  tender  notes,  which  he  seems  determined  to  keep  in 
circulation,  rather  than  fund  them,  he  having — as  it  is 
understood  during  the  past  months — issued  a  considerable 
amount  from  the  reserve,  that  had  been  kept  in  hand  to 
meet  the  deposits  which  the  people  had  lodged  in  the  Sub- 
treasuries. 


13 


VI.  Enormous  increase  of  paper  money,  and  rise  in  prices.  The 
Secretary's  plans  for  increasing  it  still  more  by  new  bank 
issues,  and  treasury  deposits,  with  unlimited  power  of 
issuing  legal  tender  paper. 

The  increase  of  the  circulating  medium  of  the  country, 
within  two  years,  to  the  enormous  extent  of  four  hundred 
millions  (or  four  hundred  and  twenty  millions),  of  legal 
tender  paper,  could  only  have  been  effected  by  the  abandon- 
ment of  the  principle  of  cash  payments  at  the  Treasury, 
which  ever  since  the  establishment  of  the  "Sub-treasury 
system"  has  been  considered  the  corner  stone  of  American 
credit.  Such  an  increase  could  never  have  existed,  but  for 
the  rash  attempt  of  the  Secretary  to  extend  that  "system" 
to  the  proceeds  of  the  loans  obtained  by  him,  in  1861,  from 
the  banks  of  the  three  cities,  taking  from  them,  in  order  to 
effect  that  object, — as  stated  by  himself,  in  a  late  public 
speech  in  Ohio, — one  hundred  and  seventy -five  millions  in 
coin,  which  large  sum  was  recklessly  scattered  to  the  four 
quarters  of  the  globe.  The  necessary  consequence  of  such 
an  increase  of  the  circulating  medium,  resulting  from  the 
suspension  of  cash  payments  at  the  Treasury,  is  that  general 
rise  in  prices  which  all  feel  and  deplore. 

If  instead  of  so  much  additional  paper  money,  this  country 
had  acquired  by  supernatural  means  the  same  additional 
currency  in  coin,  within  the  same  period,  this  influx  it  is 
true  could  not  have  failed  to  produce  a  very  great  rise  in 
prices  of  property  and  wages  of  labor,  although  experience 
teaches  that  it  could  not  have  been  as  great  as  that  which 
has  been  occasioned  by  the  legal  tender  paper;  for  if  a 
miracle  had  produced  so  much  gold  and  silver,  it  would 
have  required  another  miracle  to  have  kept  it  among  us, 
since  the  general  rise  in  prices  would  have  brought  into  the 
country  all  descriptions  of  articles  of  general  consumption, 
in  exchange  for  our  surplus  gold  and  silver,  the  latter  going 
to  foreign  countries  by  the  natural  rise  in  bills  of  exchange 
on  those  countries,  gold  and  silver  being  the  currency  of  the 


13 

world,  while  our  legal  tender  United  States  notes  circulate 
only  among  ourselves,  having  no  intrinsic  value  in  other 
countries.  These  notes  cannot  be  exported,  and  the  inevita- 
ble consequence  of  issuing  them  in  excess,  is  a  rise  in  the 
price  of  gold  and  silver,  or  the  depreciation  of  the  notes, 
which  is  the  same  thing,  the  premium  on  gold  being  equiva- 
lent to  a  corresponding  discount  on  the  paper.  It  is  a 
principle  universally  recognized,  that  the  augmentation  of 
paper  performing  the  functions  of  money,  in  any  country, 
has  a  tendency  to  depreciate  that  paper,  and  this  principle 
is  as  uniform  in  its  operation  as  the  law  of  gravitation.  It 
cannot  be  denied,  for  the  observation  of  every  man  confirms 
it,  that  the  increase  in  the  prices  of  almost  all  articles,  which 
has  been  steadily  going  on  for  more  than  a  year,  and  is  now 
arriving  at  so  great  a  height,  is  caused  chiefly  by  the  addition 
to  the  circulating  medium  made  by  the  Secretary,  with  his 
issues  of  legal  tender  paper,  uncontrolled  by  the  obligation 
of  paying  them  in  specie,  on  demand.  After  the  war  of 
1812,  the  greatest  depreciation  of  the  currency  at  New  York, 
in  October,  1815,  was  sixteen  per  cent,  discount ;  and  at 
Baltimore,  in  1816,  twenty-three  per  cent,  discount,  but  the 
discount  at  the  present  time  on  our  government  legal  tender 
notes,  gold  being  at  fifty  per  cent  premium,  is  thirty-three 
per  cent. 

Nothing  can  be  more  commendable  than  the  professions 
of  the  Secretary  in  favor  of  keeping  the  currency  near  par 
with  specie  ;  but  unfortunately  these  professions  are  not  new, 
having  been  repeated  at  intervals  during  the  past  two  years, 
while  his  practice  is  to  steadily  augment  his  issues,  urging 
on,  at  the  same  time,  the  organization  of  new  banks  to  in- 
crease still  further  the  paper  money  in  circulation,  and  now 
advocating  in  his  present  report  the  opening  of  the  Treasury 
to  unlimited  deposits,  with  the  right  of  paying  such  deposits 
from  his  reserve,  with  legal  tender,  without  limit.  No 
necessity  for  these  unlimited  issues  seems  to  exist  in  the  state 
of  the  money  market,  for  the  absorption  of  the  loans  is  so 
great  that  if  he  chose  to  negotiate  them  at  a  slight  discount 


14 

he  could  supply  the  wants  of  the  Treasury  more  rapidly  than 
they  accrue. 

VII.  The  new  banking  system— Its  defects  and  dangers— Amend- 
ments suggested. 

It  has  already  been  stated  that  the  new  banking  system  is 
similar  to  what  is  called  the  free  banking  system  of  the 
State  of  New  York,  so  far  as  regards  the  principal  of 
securing  the  notes  by  deposit  of  public  stocks,  which  was 
taken  from  the  system  adopted  in  the  case  of  the  Bank  of 
England,  holding  a  certain  amount  of  public  debt.  In  many 
other  respects,  however,  the  system  proposed  at  Washington 
has  been  altered  for  the  worse.  The  circulating  notes  are 
redeemable  only  where  issued.  Security  being  lodged  for 
the  notes,  the  banks  can  have  little  or  no  security  to  furnish 
the  government  for  deposits  lodged  with  them.  Under  the 
old  "pet  bank"  system,  as  stated  by  Mr.  Guthrie,  Secretary 
of  the  Treasury,  in  his  report  of  December  1st,  1856,  there 
were  balances  due  "from  the  late  deposit  banks;"  or,  to 
"secure  said  balances,"  to  the  sum  of  $1,609,072  32,  of  which 
he  remarked :  "most,  if  not  all,  of  it  is  lost  by  lapse  of  time 
and  insolvency."  Is  it  judicious  to  reinaugnrate  a  pet  bank 
system,  offering  inducements  for  such  defalcations,  at  a  time 
when  the  country  is  severely  taxed  for  the  heavy  expen- 
ditures of  the  war  ?  However,  it  is  avowed  by  the  Comp- 
troller of  the  Currency,  in  behalf  of  the  Treasury  Depart- 
ment, that  the  aim  of  the  government  is  to  wind  up  existing 
banks  and  supersede  them  by  the  proposed  new  ones.  If 
Congress  shall  continue  to  sanction  the  scheme,  it  is  indis- 
pensible,  for  the  safety  of  the  country,  that  the  law  should 
be  amended ;  for  in  the  winding  up  of  existing  banks  and 
the  sale  of  their  stocks  of  specie,  which  have  inspired  con- 
fidence at  home  and  abroad  in  the  financial  strength  of  the 
government,  we  shall  be  launched  upon  tempestuous  seas  if 
the  law  remains  as  it  is.  The  amendments  and  measures 
which  seem  to  be  required  are  : 


15 

1.  To  require  each  bank  to  procure  and  hold  a  certain 
per  centage  of  coin  or  bullion   upon  the  amount  of  its 
demand  liabilities,  as  a  part  of  the  twenty-five  per  cent, 
reserve  provided  for  now  in  the  law. 

2.  To  have  the  bills  redeemed  at  some  one  central  point, 
on  demand,  in  lawful  money  of  the  United  States.     "A 
uniform  national  currency,"  issued  and  redeemable  at  differ- 
ent places,  is  a  chimera.    To  be  "uniform"  it  is  indispensable 
that  it  should  be  redeemed  at  some  central  points — say  New 
York,  Boston,  and  Philadelphia. 

3.  That  no  bank  commence  business  until  the  declared 
capital  be  paid  up  in  full,  with  the  right  to  increase  such 
capital  from  time  to  time. 

4.  That  the  forfeiture  of  the  interest  charged  shall  be  the 
penalty  for  usury,  except  in  the  case  of  banks  located  at 
sea  ports,  which  shall  be  permitted  to  collect  the  rate  of 
interest  agreed  upon  for  discounting  business  paper  having 
not  more  than  ninety  days  to  run. 

5.  The  stocks  pledged  for  the  redemption  of  circulating 
notes  to  be  registered  at  Washington,  and  prohibiting  by 
law  the  transfer  thereof  until  such  notes  be  redeemed.  When 
thus  registered,  the  certificates  of  stock,  stamped  on  their 
face  as  not  transferable  except  for  redemption  of  the  notes, 
could  safely  be  returned  to  the  custody  of  the  bank,  and 
thus  avoid  the  lodgment  of  hundreds  of  millions  of  stocks  in 
the  hands  of  a  single  individual  at  Washington-.     Recent 
frauds  or  defalcations  in  the  Treasury  prove  this  to   be 
judicious. 

6.  Congress  to  pass  a  joint  resolution  of  both   Houses, 
appealing  to  the  State  Legislatures  to  pass  enabling  acts  for 
the  state  banks  to  organize  under  the  United  States  banking 
system. 

7.  State  Banks  organizing  under  the  law,  to  be  permitted 
to  retain  their  own  names.    An  unusual  stretch  of  power  has 
been  exercised  by  the  Secretary  of  the  Treasury,  for  which 
there  seems  to  be  no  authority  in  the  law,  requiring  every 
bank  to  be  known  by  "a  number."   This  arbitrary  rule  is  so 


10 

destructive  to  that  individuality  which  gives  rise  to,  and  is  a 
reward  of,  enterprise  and  skill,  that  it  recalls  the  edicts  of 
"uniformity"  and  "conformity"  of  benighted  countries  and 
times.  Among  savage  or  barbarous  tribes,  family  names  are 
unknown,  and  in  semi-barbarous  countries  all  that  love  of 
individuality  which  characterizes  the  progress  of  advancing 
civilization,  is  studiously  repressed.  It  is  to  be  hoped  the 
Secretary  will,  upon  reflection,  retrace  this  step  toward  bar- 
barism, recall  his  numerical  edict,  and  permit  each  bank  to 
be  known  by  something  more  expressive  than  a  mere  num- 
ber. Names  are  much  more  easily  impressed  upon  the 
mind  than  numbers,  and  as  the  credit  of  the  proposed  banks 
may  be  endangered  by  attempts  at  fraudulent  banking,  it 
would  seem  desirable  to  add,  or  permit  the  use  of,  distinctive 
names,  as  much  confusion  must  necessarily  arise  from  even 
a  single  failure  among  the  new  banks  having  only  one  name. 
Uniformity  of  name  already  causes  much  confusion,  in  cities 
where  more  than  one  national  bank  has  been  organized,  at 
the  counters  of  banks,  at  the  post  office,  among  messengers, 
express  carriers,  &c.  The  confounding  of  names  by  the 
public  makes  "confusion  worse  confounded"  in  financial 
dealings  with  such  banks.  In  New  York,  for  example, 
No.  1  is  in  the  extreme  southern  portion  of  the  city,  while 
No.  2  is  some  miles  in  a  northerly  direction,  and  people 
mistaking  one  for  the  other  are  compelled  to  lose  much  time 
in  correcting  their  mistakes,  while  the  officers  and  employees 
of  the  banks  themselves  require  all  the  patience  and  good 
nature  of  the  most  "good-natured-man"  to  get  over  the 
annoyances  incident  to  being  "known  by  their  numbers." 
Were  the  Secretary  himself,  or  the  Comptroller  of  the 
Currency,  or  both,  stationed  at  the  desk  of  such  a  bank  for  a 
single  business  day,  we  should  probably  have  within  twenty- 
four  hours  thereafter,  an  "appeal  to  Congress"  for  an  act 
abolishing  the  designation  of  the  new  national  banks  by 
"simple  numerals,"  and  requiring  each  to  take  "a  proper 
name." 
8.  The  Treasury  Department  to  exact  security  of  each 


17 

bank  for  the  public  deposits  lodged  with  it.  Why  should 
not  a  bank  give  that  security  which  is  required  of  the  Assist- 
ant Treasurers  ?  It  is  contrary  to  every  principle  of  sound 
government  to  sanction  a  system  of  finance  that  places  the 
public  money  in  the  hands  of  parties  not  responsible  to  the 
government,  without  security ;  and  if  it  be  wise  to  exact 
security  for  the  notes  circulating  in  the  hands  of  the  people, 
it  is  no  less  so  to  require  security  for  the  money  of  the  people 
lodged  in  the  hands  of  the  banking  associations. 

These  measures,  promptly  adopted  by  Congress,  would 
render  the  proposed  banking  system  more  palatable  than  it 
now  is  to  the  people,  who  see  in  it  a  wild  inflation  and  a 
disastrous  monetary  revulsion,  to  come  upon  them  all  at  no 
very  distant  period.  The  first  measure  suggested  is  of  vital 
importance  to  the  national  credit,  for  if  all  banks  organizing 
under  the  law  are  to  do  so,  without  holding  any  coin  what- 
ever, wliich  is  the  case  so  far — and  if  State  Banks,  now 
holding  specie,  wind  up  and  sell  out  their  coin,  preparatory 
to  reorganizing  under  the  law,  without  any  specie — it  is 
obvious  that  the  coin  will  be  bought  up  by  commercial 
establishments  for  shipment  to  other  countries  (except  what 
may  be  hoarded  and  that  required  for  duties,  to  be  paid  out 
for  interest  on  the  public  debt),  leaving  the  whole  banking 
system  of  the  country  in  the  anomalous  condition  of  banking 
wholly  upon  paper.  In  the  case  of  the  State  banks,  which 
now  hold  specie,  they  cannot  reorganize  under  the  law  with- 
out forfeiting  their  charters  and  selling  their  coin.  Hence, 
the  suggestion  (No.  6)  that  both  Houses  of  Congress,  by  joint 
resolution,  appeal  to  the  Legislatures  of  the  States  to  pass 
enabling  acts  sanctioning  the  organization  of  the  State  banks 
under  the  national  law,  without  compelling  them  to  wind  up 
their  affairs  and  go  into  liquidation.  In  the  case  of  banks 
already  organized  under  the  law,  would  it  be  sufficient  to  re- 
quire them  to  retain  for  a  certain  number  of  years,  or  until 
it  had  reached  a  certain  per  centage  of  their  demand  liabili- 


18 

ties,  the  coin  paid  to  them  by  the  government  for  interest  on 
the  public  debt  held  by  such  banks  ? 

VIII.  The  Secretary's  Proposition  for  an  Unlimited  Deposit 
System,  to  be  Worked  by  Discretionary  Issues  of  Legal 
Tender— Origin  of  the  Legal  Tender  Scheme— Vast 
Expansion  Proposed  by  Writers  in  this  Country  and  in 
England— Fate  of  the  Rebel  Currency— More  of  the  De- 
ceptions practiced  upon  the  Secretary. 

When  Congress  limited  the  right  of  the  Secretary  to  re- 
ceive deposits  on  interest  to  the  extent  of  one  hundred  mil- 
lions, it  was  stipulated  that  there  should  be  held  in  reserve, 
to  meet  these  deposits  when  called  for,  a  certain  amount  of 
legal  tender  notes.  This  reserve,  when  used  in  payment  of 
the  deposits,  becomes,  to  the  extent  issued,  an  addition  to  the 
volume  of  legal  tender  notes  circulating  in  the  hands  of  the 
people.  How  that  reserve  has  been  disposed  "of,  and  the 
practical  working  of  this  deposit  system  hitherto,  are  matters 
which  need  not  here  be  explained.  The  Secretary  now  pro- 
poses to  extend  this  deposit  system,  in  these  words : 

"The  Secretary  perceives  no  solid  reason  for  retaining  the 
restriction  on  loans,  in  this  form,  to  one  hundred  millions 
of  dollars.  It  may,  as  he  thinks,  be  usefully  removed. 
As  the  advantages  of  these  deposits  become  better  and  more 
generally  understood,  the  loan  in  this  form  will  doubtless,  in 
the  absence  of  restriction,  be  largely  increased,  and  the 
possibility  for  demands  for  reimbursements,  beyond  means 
to  meet  them,  can  be  fully  provided  for  by  an  increase  of 
the  existing  proportion  between  deposits  and  reserve. — 
Such  an  arrangement,  the  Secretary  inclines  to  think,  would 
operate  beneficially  by  increasing  the  amount  of  currency 
when  unusual  stringency  may  require  increase,  and  re- 
ducing its  amount  when  returning  ease  shall  allow  reduc- 
tion." (Page  16).  He  proposes,  on  page  18,  "the  repeal 
of  the  existing  limitation  of  the  deposit  loan  to  one  hundred 
millions  of  dollars,  and  the  substitution  of  a  provision  for  a 
reserve  equal  in  amount  to  half  the  deposit."  But  he 


19 

appears  to  have  wholly  overlooked  the  situation  in  which 
he  would  be  placed,  should  the  public  call  for  their  deposits 
to  an  amount  exceeding  his  proposed  reserve ;  in  such  a 
case,  he  could  not  stop  payment  and  confess  bankruptcy. 
He  would  be  compelled  to  make  legal  tender  issues  equal  to 
the  public  demand  for  the  deposits ;  and  hence  it  is  evident 
that  this  proposal  to  create  a  deposit  system  without  limit  is 
in  fact  a  proposal  to  issue  more  legal  tender  paper  without 
limit ! 

And,  yet,  the  Secretary  appears  to  be  wholly  unconscious 
of  the  consequences  of  the  measure  he  proposes,  for  on  page 
17,  he  says:  "The  limit  prescribed  by  law  to  the  issue  of 
United  States  notes  has  been  reached,  and  the  Secretary 
thinks  it  clearly  inexpedient  to  increase  the  amount."  No 
doubt  he  speaks  the  honest  convictions  of  his  heart.  But 
others  do  not  think  with  him.  One  writer,  as  late  as  September, 
1863,  in  a  pamphlet  issued  in  Philadelphia,  advocates  un- 
limited issues.  The  most  extraordinary  and  persistent  efforts 
have  been  made  to  induce  the  Secretary  to  go  on  with  the 
issues  of  vast  volumes  of  paper  money,  in  one  form  or 
other,  under  the  most  specious  disguises,  ever  since  he 
entered  upon  the  duties  of  his  office ;  and  our  only  hope  of 
being  saved  from  such  a  ruinous  course  seems  now  to  be  the 
warning  so  opportunely  given  in  the  collapse  of  the  seven 
hundred  millions  of  paper  money  issued  by  the  miserable 
leaders  of  the  insurrection  at  Richmond.  It  is  difficult  to 
trace  those  theories  of  paper  money  which  have  been  so 
persistently  urged  upon  Mr.  Chase,  and  to  so  great  an 
extent  embraced  by  him,  to  their  most  recent  sources. 
They  first  appeared  in  France,  under  the  direction  of  John 
Law,  culminating  in  disaster  and  ruin  to  the  French  people 
in  the  early  part  of  the  last  century.  To  Mr.  McCulloch, 
the  celebrated  English  writer  on  commerce  and  currency,  is 
supposed  to  belong  the  credit  or  discredit  of  having  revived 
them  in  our  own  time,  by  expressing  an  opinion  that  the 
unjust  influences  of  a  paper  currency  might  be  partially  if 
not  wholly  removed  if  it  were  issued  by  or  under  authority 


20 

of  government,  and  made  a  legal  tender.  This  opinion 
appears  to  have  been  the  cause  of  a  powerful  agitation 
that  has  sprung  up  in  England  and  Scotland,  extending  to 
this  country,  if  it  did  not  originate  here,  in  favor  of  unlimited 
issues  of  legal  tender  paper.  ME.  ALFRED  LUTWYCHE,  of 
Birmingham,  England,  writing  in  December,  1856,  proposed 
'that  the  British  Government  should  issue  legal  tender  paper 
money  in  exchange  for  government  consols,  paying  out  the 
consols  in  exchange  for  the  paper  money,  without  any 
limitation.  He  also  advocated  at  that  time  the  unlimited 
deposit  system  now  proposed  by  Mr.  Chase,  giving  precisely 
the  same  reason  for  its  adoption.  But  Mr.  Lutwyche,  in  a 
recent  publication,  admits  that  others  had  thought  of  the 
same  measures,  and  urged  them,  before  he  proposed  them. 
He  says : 

"The  author  was  not  aware  at  the  time  he  published  the 
suggestion  that  any  similar  proposition  was  before  the  public, 
but  it  was  pointed  out  to  him  by  the  late  G.  F.  Muntz,  that 
a  plan  very  like  it  was  proposed  in  a  work,  entitled  "  Cur- 
rency Self-Regulating, "  published  in  1 855,  by  Mr. 
McPhinri  of  Glasgow,  and  shortly  after  Mr.  James  Harvey 
of  Liverpool,  furnished  the  writer  of  this  with  a  copy  of  a 
pamphlet,  published  in  1849,  by  the  "Liverpool  Currency 
Reform  Association,"  in  which  is  proposed  a  plan  exactly 
the  same  as  the  one  now  re-submitted." 

But  there  is  reason  to  believe  that  Mr.  Erskine  Hazard  of 
Philadelphia,  preceded  the  English  writers,  for  in  a  pamph- 
let dated  26th  September,  1863,  he  says  he  proposed,  in  1839, 
that  the  United  States  Government  should  issue  legal  tender 
paper  money,  and  communicated  his  views  by  letter  to  Mr. 
Chase,  December  17th,  1861,  as  well  as  to  Hon.  Thaddeus 
Stevens,  chairman  of  the  Finance  Committee  of  the  House 
of  Representatives.  He  says :  "  I  do  not  know  that  either 
of  these  letters  was  received,  as  I  have  had  no  communication 
to  that  effect  from  either  of  the  gentlemen  to  whom  they 
were  addressed.  The  only  reason  I  have  to  suppose  they 
were  received  is,  that  the  phrase  " when  presented  in  multi- 


21 

pies  of  fifty  dollars"  which  was  used  in  my  letter,  occurs 
in  the  law  which  was  soon  after  brought  before  Congress" 

The  extraordinary  similarity  between  the  plans  of  Mr. 
Hazard,  and  those  of  the  English  writers,  and  of  Mr.  Chase, 
is  best  illustrated  in  the  following  quotations  from  the 
writings  of  each : 

Mr.  Hazard  says: — "The  funded  debt  absorbs  whatever 

[legal  tender  notes]  would  form  an  excess  of  circulation 

The  surest  and  safest  reliance  is  the  legal  tender  system 
extended  so  as  to  occupy  the  whole  circulation  of  the  coun- 
try  The  [legsil  tender]  Treasury  Notes  are  to  be 

redeemed  by  bonds,  and  bonds  are  to  be  purchased  by  the 
issue  of  [legal  tender]  Treasury  Notes." 

Mr.  Alfred  Lutwyche  of  Birmingham,  England,  adopts 
the  following  defence  of  this  system,  proposed  by  him  in 
1856,  from  a  paper  issued  by  the  "Liverpool  [England] 
Currency  Reform  Association": 

"It  may  be  objected  that,  under  this  system,  the  whole 
amount  of  the  national  [English]  funds  might  be  converted 
into  money,  and  the  country  be  over  supplied.  The  Associa- 
tion have  no  such  fears,  as  the  demand  for  money  is  neces- 
sarily limited  by  the  ability  of  employing  it  profitably, — 
the  supply  of  it  may  be  left  to  adjust  itself  to  the  require- 
ments of  trade." 

In  Mr.  Chase's  Report,  December  10th,  1863,  he  defends 
this  unlimited  deposit  system  in  these  words: 

"  Such  an  arrangement,  the  Secretary  inclines  to  think, 
would  operate  beneficially  by  increasing  the  amount  of 
currency  when  unusual  stringency  shall  require  increase, 
and  reducing  its  amount  when  returning  ease  shall  allow 
reduction." 

The  deceptive  character  of  these  theories  has  been  so  often 
demonstrated,  without  convincing  their  advocates,  that  we 
shall  owe  our  escape  from  their  full  application  by  Congress, 
at  the  present  juncture,  most  probably  to  that  great  illustra- 
tion of  their  folly,  which  is  now  being  enacted  in  the  insur. 
surgent  States,  where  seven  hundred  million  of  dollars  of 


22 

currency,  that  was  convertible  into  eight  per  cent,  bonds,  has 
sunk  so  low  that,  at  last  accounts  from  some  of  the  cities  yet 
held  by  the  rebel  chiefs,  one  dollar  in  real  money  would  buy 
twenty  dollars  of  it!  Yet  that  money  was  convertible! — 
convertible  into  eight  per  cent,  'bonds !  Why  then  has  it 
gone  the  way  of  all  such  currencies?  Is  it  because  the 
Southern  people,  giving  up  all  expectation  of  success,  are 
ready  for  an  unconditional  surrender,  and  desire  to  prove  to 
the  world,  by  the  very  worthlessness  of  their  money,  that 
they  had  no  heart  in  the  rebellion,  drafting  their  whole  able- 
bodied  male  population  only  to  be  slaughtered  by  the  armies 
of  the  Union?  Or  is  it  from  the  law  of  depreciation,  in- 
herent in  paper  money  issues?  "What  is  it  has  saved  our 
financial  system  from  heavier  depreciation  than  we  have  yet 
experienced,  but  the  limitation  of  the  volume  of  the  issues, 
the  payment  of  the  interest  on  our  bonds  in  gold,  the  retain- 
ing of  large  stocks  of  gold  in  the  country,  and  the  collection 
of  duties  in  gold  ?  And  yet,  as  if  to  destroy  the  last  vestige 
of  our  safety,  the  gentleman  (Mr.  Hazard,  of  Philadelphia) 
who  seems  to  have  originated  the  United  States  legal  tender 
measures,  proposes  in  his  pamphlet,  already  referred  to,  to 
dispense  with  gold  altogether  as  a  currency,  to  cease  to  exact 
it  for  duties,  and  to  cease  to  pay  it  for  interest  on  the  bonds 
of  the  nation.  He  says,  on  page  3 : 

"  It  was  a  great  mistake  in  Congress  to  make  the  interest 
on  the  United  States  loans  payable  in  that  medium  (gold), 
for  it  was  done  on  the  popular  fallacy,  that  gold  was  a  letter 
payment  than  legal  tender  notes."  On  the  same  page,  he 
suggests  how  "  the  use  of  gold,  in  payment  of  interest  and 
duties,  could  still  be  avoided  to  a  great  extent." 

One  of  the  men  of  the  Revolution,  writing  at  Philadel- 
phia in  1Y86,  remarked : 

"  It  was  horrid  to  see,  and  hurtful  to  recollect,  how  loose 
the  principles  of  justice  were  let  by  means  of  the  paper 

emissions  during  the  war As  to  the  romantic, 

if  not  hypocritical  tale,  that  a  virtuous  people  need  no  gold 
and  silver,  and  that  paper  will  do  as  well,  requires  no  other 


contradiction  than  the  experience  we  have  seen.  Though 
some  well-meaning  people  may  be  inclined  to  view  it  in  this 
light,  it  is  certain  that  the  sharper  always  talks  this  language. 
There  are  a  set  of  men  who  go  about  making  purchases  upon 
credit,  and  buying  estates  they  have  not  where withall  to  pay 
for ;  and  having  done  this,  their  next  step  is  to  fill  the  news- 
papers with  paragraphs  of  the  scarcity  of  money  and  the 
necessity  of  a  paper  emission,  then  to  have  it  made  a  legal 
tender,  under  the  pretence  of  supporting  its  credit ;  and 
when  out,  to  depreciate  it  as  fast  as  they  can,  get  a  deal  of  it 
for  a  little  price,  and  cheat  their  creditors :  and  this  is  the 
concise  history  of  paper  money  schemes." 

The  Secretary  says :  "  Certainly  there  ought  to  be  no  dif- 
ference in  favor  of  coin,  when  it  is  remembered  that  United 
States  bonds,  bearing  six,  or  even  five  per  cent,  coin  interest, 
are  intrinsically  worth — unless  the  theory  of  national  bad 
faith,  or  national  insolvency  is  to  be  admitted — more  than 
their  amount  in  coin,  and  yet  such  bonds  can  now  be  had  for 
their  amount  in  United  States  notes." 

"What  does  the  Secretary  mean?  He  asserts  that  the 
United  States  bonds  are  "intrinsically  worth"  more  than  their 
amount  in  coin,  yet  they  can  be  had  for  their  amount  in 
United  States  notes,  being  thirty-three  and  a  third  per  cent, 
(gold  being  at  fifty  premium)  below  their  price  in  coin. 
Why  are  the  bonds  so  low  ?  Because  of  the  excessive  issues 
of  legal  tender  paper.  As  to  intrinsic  worth,  the  bonds 
cannot  be  sold  for  coin,  except  at  a  great  depreciation — nor 
is  any  description  of  property  sold  for  coin — and  when 
people  in  Europe  can  send  their  gold  here  and  get  fifty  per 
cent,  more  than  its  nominal  price,  in  United  States  bonds, 
our  own  people  must  continue  to  bear  the  loss  of  thirty-three 
and  a  third  per  cent.  Every  article  sells  according  to  the 
market  price,  or  the  supply  and  demand,  not  altogether  ac- 
cording to  its  supposed  intrinsic  worth.  A  large  quantity  of 
anything,  yet  to  come  on  the  market,  naturally  tends  to  keep 
down  the  price,  irrespective  of  any  apprehension  or  fear  of 
the  final  insolvency  of  parties  issuing  bonds  or  obligations. 


24 

At  one  period  the  bonds  of  the  State  of  New  York,  owing 
to  the  quantity  put  on  the  market,  and  not  to  any  fear  of  the 
State  solvency,  sold  at  more  than  twenty  per  cent,  discount ; 
and  in  the  case  of  numerous  failures  of  his  new  banks,  and  the 
offer  of  a  large  amount  of  United  States  stocks  in  the  market 
at  any  one  time  to  redeem  the  circulating  notes  of  the  banks 
failing,  the  same  rapid  fall  in  the  price  of  United  States 
stocks  would  naturally  take  place. 

The  ideal  term  used  by  Mr.  Chase,  intrinsic  worth,  as  dis- 
tinguished from  real  (money)  value,  has  haunted  the  brains 
of  all  speculators  on  money  from  the  time  of  Law  down- 
wards. Now,  this  term,  intrinsic  worth,  is  an  abstract  idea, 
as  applied  to  the  value  or  worth  of  United  States  bonds, 
which  abstract  idea  becomes  the  Secretary's  standard  of 
value.  Dugald  Stewart  has  demonstrated  in  his  work  on  the 
"Elements  of  the  Philosophy  of  the  Human  Mind"  (Chapter 
on  Abstraction),  that  there  can  be  no  such  thing,  except 
in  the  imagination,  as  an  abstract  idea.  This  is  certainly 
true,  as  applicable  to  all  money  values,  therefore  an  ideal 
standard  of  value  (intrinsic)  is  a  thing  inconceivable ;  an 
actual  commodity  of  known  value  is  required  as  a  stan- 
dard, distinct  from  the  conception  of  something  valued ; 
it  is  this  actual  commodity  (gold  and  silver)  to  which, 
in  all  cases,  must  be  referred  the  degrees  of  value  of  all 
transferable  property ;  government  bonds  are  regarded  in 
the  market  as  mere  articles  of  barter  —  as  goods  or  chat- 
tels—  and  are  bought  and  sold  as  such.  The  price  of  every 
article,  or  its  value  in  exchange,  is  determined  by  the 
proportion  which  the  supply  bears  to  the  demand ;  if  the 
supply  is  enlarged  while  the  demand  continues  the  same, 
the  price  of  the  article  (United  States  bonds)  must  diminish, 
the  depreciation  arising,  not  from  the  credit  of  the  govern- 
ment having  become  less,  but  from  the  quantity  of  govern- 
ment bonds  having  become  too  great. 


IX.  Deceptive  Character  of  Paper  Money— The  Comptroller  vs. 
The  Secretary— Ruinous  Consequences  Morally,  Socially  and 
Politically  of  Paper  Money— Experience  of  Former  Times. 

Although  the  Secretary  seems  inclined  to  think  there  is 
enough  of  paper  money  afloat,  yet  the  unlimited  deposit 
system  which  he  advocates,  and  his  great  desire  to  get  out 
the  three  hundred  millions  of  new  bank  paper,  are  evidences 
of  the  deceptive  nature  of  his  own  expressed  views  of  paper 
money.  The  flood-gates  once  opened,  where  is  the  deluge 
to  stop  ?  Already  we  hear  it  proposed  to  repeal  the  limita- 
tion of  the  new  bank  issues  !  to  make  them  also  unlimited! 
Had  Mr.  Chase  read  the  Report  made  to  him,  November 
28th,  1863,  by  his  Comptroller  of  the  Currency,  he  would 
have  found  the  following  language  on  pages  8  and  9 : 

"An  increase  in  the  circulating  medium  inflates  prices. 
High  prices  require  an  increased  (or  increase  of)  circulation, 
and  so  they  act  and  react  upon  each  other,  and  there  ap- 
pears to  be  no  redundancy  of  currency,  no  matter  how  vast 
the  volume  may  be,  until  a  collapse  takes  place,  and  what 
was  supposed  to  be  real  prosperity  is  shown  to  be  without  a 
substantial  foundation." 

But  the  Secretary  says,  of  his  proposed  unlimited  deposit 
system,  page  16,  of  his  own  Report: 

"  Such  an  arrangement,  the  Secretary  inclines  to  think, 
would  operate  beneficially,  by  increasing  the  amount  of  cur- 
rency when  unusual  stringency  shall  require  increase,  and 
reducing  its  amount  when  returning  ease  shall  allow  re- 
duction." 

It  is  difficult  to  understand  the  Secretary's  views  of 
"unusual  stringency,"  and  "returning  ease,"  at  a  time  when 
the  circulation  of  the  loyal  states  has  been  increased,  from 
one  hundred  and  fifty  millions,  by  the  addition  of  four  hun- 
dred millions  of  legal  tender  notes,  and  he  is  fostering  the 
further  issue  of  three  hundred  millions  of  new  bank  paper ! 
with  gold  at  fifty  per  cent  premium ! 

In  1786,  when  this  country  had  very  recently   passed 


28 

through  the  ordeal  of  a  great  issue  of  paper  money,  an  able 
writer  said : 

"  The  evils  of  paper  money  have  no  end.  Its  uncertain 
and  fluctuating  value  is  constantly  awakening  or  creating 
new  schemes  of  deceit.  Every  principle  of  justice  is  put  to 
the  rack,  and  the  bond  of  society  is  dissolved :  the  suppres- 
sion therefore  of  paper  money  might  very  properly  have 
been  put  in  the  Act  for  preventing  vice  and  immorality. 
Paper  money  is  like  dram  drinking,  it  relieves  for  the  mo- 
ment by  a  deceitful  sensation,  but  gradually  diminishes  the 
natural  heat,  and  leaves  the  body  worse  than  it  found  it. 
Were  not  this  the  case,  and  could  money  be  made  of  paper 
at  pleasure,  every  Sovereign  in  Europe  would  be  as  rich  as 
he  pleased.  But  the  truth  is,  that  it  is  a  bubble,  and  the 
attempt  vanity.  Nature  has  provided  the  proper  materials 
for  money,  gold  and  silver,  and  any  attempt  of  ours  to  rival 
her  is  ridiculous." 

"Money  when  considered  as  the  fruit  of  many  years' 
industry,  as  the  reward  of  labor,  sweat  and  toil ;  as  the 
widow's  dowry  and  the  children's  portion,  and  as  the  means 
of  procuring  the  necessaries  and  alleviating  the  afflictions  of 
life,  and  making  old  age  scene  of  rest,  has  something  in  it 
sacred,  that  is  not  to  be  sported  with,  or  trusted  to  the  airy 
bubble  of  paper  currency." 

"As  to  the  assumed  authority  of  any  Assembly  in  making 
paper  money,  or  paper  of  any  kind,  a  legal  tender,  or  in 
other  words  a  compulsive  payment,  it  is  a  most  pre-sumpt- 
uous  attempt  at  arbitrary  power.  There  can  be  no  such 
power  in  a  republican  government.  The  people  have  no 
freedom,  and  property  no  security  where  this  practice  can 
be  acted ;  and  the  committee  who  shall  bring  in  a  report  for 
this  purpose,  or  the  member  who  moves  for  it,  and  he  who 
seconds  it,  merit  impeachment." 

The  revolutionary  tendencies  of  a  debased  currency  of 
coined  money,  and  of  paper  money,  are  established  by  the 
history  of  all  nations.  In  our  own  history,  there  have  been 
tremendous  struggles  of  the  people  to  get  rid  of  the  authors 


27 

and  advocates  of  paper  money  theories,  whether  of  bank 
paper  or  government  paper.  The  same  thing  has  been  wit- 
nessed in  several  of  the  nations  of  Europe.  The  revolution- 
ary era  of  France  had  its  dawn  in  the  vast  paper  money 
schemes  of  Law.  The  debasing  of  the  coined  money,  which 
is  the  same  as  issuing  paper  money,  is  stated  to  have  been 
"one  of  the  principal  means  of  finally  overthrowing  the 
power  of  the  Stewart  family  in  Ireland,"  of  which  LelancPs 
history  gives  the  following  account,  so  closely  resembling  the 
operations  with  paper  money  in  our  own  time:  "Brass  and 
copper  of  the  basest  kind,  old  cannon,  broken  bells,  house- 
hold utensils  were  assiduously  collected;  and  from  every 
pound  weight  of  such  vile  materials,  valued  at  four  pence, 
pieces  were  coined  and  circulated  to  the  amount  of  five 
pounds  nominal  value.  By  the  first  proclamation  they  were 
made  current  in  all  payments  to  and  from  the  king,  and  the 
subjecti  of  the  realm,  except  in  duties  on  the  importation  of 
foreign  goods,  money  left  in  trust,  or  due  by  mortgage,  bills 
or  bonds ;  and  James  promised  that  when  the  money  should 
be  decried,  he  would  receive  it  in  all  payments  or  make  full 
satisfaction  in  gold  and  silver.  The  nominal  value  was 
afterwards  raised  by  subsequent  proclamations,  the  original 
restrictions  removed,  and  this  base  money  was  ordered  to  be 
received  in  all  kinds  of  payments.  As  brass  and  copper 
grew  scarce  it  was  made  of  still  viler  materials,  of  tin 
and  pewter,  and  old  debts  of  one  thousand  pounds  were 
discharged  by  pieces  of  vile  metal,  amounting  to  thirty 
shillings  in  intrinsic  value." 

One  of  the  evils  of  paper  money,  it  has  been  remarked,  18, 
that  it  turns  nearly  all  classes  of  the  people  into  speculators 
and  gamblers.  In  1780,  when  the  repeal  of  legal  tender 
laws  was  up  in  the  Assembly  of  Pennsylvania,  Col.  Bayard, 
the  Speaker,  being  called  upon  to  give  the  casting  vote, 
said:  "I  give  my  vote  for  the  repeal  from  a  consciousness  of 
justice ;  the  tender  laws  operate  to  establish  iniquity  by  law." 
But  in  1863,  a  writer  in  Pennsylvania  argues  that  "on  the 
exclusive  legal  tender  system,  the  great  difficulty  will  be  to 


98 

keep  up  a  national  debt,  not  to  pay  it  off."  Evidently,  lie 
does  not  read  the  newspapers,  else  he  would  have  known 
the  fate  of  the  rebel  paper  money. 

In  recapitulating  his  measures,  the  Secretary  of  the 
Treasury  says : 

"In  these  several  ways  may  even  such  great  evils  as  are 
brought  upon  us  by  rebellion  be  transmuted,  by  a  wise 
alchemy,  into  various  forms  of  utility.  The  Secretary  has 
endeavored  to  use  this  alchemy,  with  what  success  the 
country  will  judge  when  time  and  trial  shall  have  applied  to 
his  work  their  unfailing  tests." 

Unfortunately,  of  his  excessive  issues  of  paper  money, 
which  were  so  uncalled  for,  and  which  could  have  been 
avoided  had  he  put  his  stocks  on  the  market,  the  following, 
from  an  old  writer,  will  enable  him  to  anticipate  the  judg- 
ment of  his  country : 

"I  remember  a  German  farmer  expressing  as  much  in  a 
few  words  as  the  whole  subject  requires,  'Money  is  money 
and  paper  is  paper.'  All  the  invention  of  man  cannot  make 
it  otherwise.  The  aichemyst  may  cease  his  labors,  and  the 
hunter  after  the  philosopher's  stone  g^  to  rest,  if  paper  can 
be  metamorphosed  into  gold  and  silver,  or  made  to  answer 
the  same  purpose  in  all  cases." 

The  Secretary  has  referred  to  the  rise  in  railroad  bonds 
from  increased  income,  and  in  cotton  from  deficient  supply. 
He  overlooks  the  gambling  in  stocks  of  all  kinds,  prices 
rising  one  hundred  or  two  hundred  per  cent.,  without  any 
increased  income;  the  numbers  of  people  drawn  from 
industrial  pursuits,  to  become  speculators  in  stocks,  gold, 
produce,  &c. — reminding  one  of  that  historical  caricature, 
produced  at  Paris  in  the  time  of  Law,  having  in  the  centre 
a  portrait  of  Lord  Quincampoix*  with  a  motto,  "ant  Caesar, 
aut  nihil"  A  crown  of  peacock's  feathers  and  thistles, 
presented  by  folly,  bore  the  inscription.  "I  am  the  sport  of 


•The  great  speculative  transactions  in  funds  and  property  at  that  period 
took  place  in  a  public  street,  the  Rvt  Quincampoix. 


29 

the  wise  and  the  foolish."  Beneath  the  portrait  was  a 
smoking  cauldron,  which  an  attendant  devil  kept  boiling 
with  new  supplies  of  paper;  an  "Operator"  stood  near, 
throwing  handsfull  of  gold  and  silver  into  the  cauldron, 
which  melted  and  sunk  to  the  bottom,  and  nothing  returned 
but  new  scraps  of  paper;  despair  stood  by,  ready  to  seize  the 
unfortunate  wretch,  as  soon  as  he  had  completed  his  insane 
operation. 

Our  large  cities  are  witnessing  the  same  phases  of  insanity, 
from  our  excessive  issues  of  paper  money ;  but  we  have  the 
satisfaction  to  know  that  Mr.  Chase  may,  if  he  pleases,  by  a 
timely  exercise  of  patriotism  and  wisdom,  by  calling  in  and 
reducing  his  paper  money  issues — means  being  at  his  com- 
mand, for  effecting  that  object — reinstate  himself  in  the 
affections  of  the  people  and  become  more  illustrious  in  the 
best  sense  of  that  word,  than  any  alchemyst  known  to 
history.  His  memory  will  thus  escape  that  ambiguity 
which  hangs  around  the  character  of  the  alchemyst  of  the 
middle  ages,  thus  hinted  at  by  Horsley  : 

"Time  was  when  I  know  not  what  mystical  meanings 
were  drawn  by  a  certain  cabalistic  alchemy  from  the  sim- 
plest expressions  of  holy  writ." 

X.  Financial  Measures  of  the  Secretary— Causes  of  the  Failure  of 
Some  and  the  Success  of  Others— Aid  of  the  Banks,  and  Suc- 
cess of  their  United  Efforts— Attempt  to  Make  War  on  th« 
Old  Banks— Failure  of  the  Attempt— False  Friends  of  th» 
Administration— National  Banking  System  Originated  by 
the  Sound  Financial  Policy  of  the  City  Banks— How  the 
New  System  may  be  Made  Successful. 

Among  the  assumptions  of  the  Secretary,  not  the  least  re- 
markable is  that  which  prefaces  the  review  of  his  successful 
measures,  attributing  to  the  Loan  Act  and  National  Bank 
Act,  that  revival  of  public  credit  which,  by  his  own  pre- 
ceding confessions,  was  mainly  owing  to  the  success  of  the 
army  and  navy  in  suppressing  the  rebellion.  He  confesses 
that  the  want  of  this  latter  success  had  depressed  the  public 


30 

credit,  and  as  no  new  national  banks  had  been  organized  at 
the  time  the  public  credit  revived,  it  is  evidently  a  great 
error  to  attribute  that  revival  to  the  creation  of  banks  which 
had  no  existence  at  the  time  the  event  occurred.  It  was  the 
want  of  military  success,  the  mismanagement  of  the  War 
and  other  Departments,  with  the  proposed  deluge  of  legal 
tender  paper  money,  which  depressed  public  credit  so  fear- 
fully'in  1861-62.  Shameful  incompetency,  with  all  the  self- 
conceit  of  ignorance,  distinguished  the  early  efforts  of  many 
of  the  officers  of  the  government,  immediately  upon  the  ac- 
cession of  the  administration,  in  1861.  In  the  finances  there 
was  total  paralysis,  until  the  New  York  banks  and  merchants 
took  hold  of  the  negotiation  of  the  loans,  which  they  did  as 
soon  as  the  administration  came  into  power,  uniting  the 
banks  and  capitalists  of  Boston  and  Philadelphia  with  those 
of  New  York  in  harmonious  support  of  the  government, 
until  the  Secretary,  having  secured  one  hundred  and  seventy 
millions  of  coin,  not  having  the  skill  to  organize  a  banking 
system  in  the  Sub-Treasuries  upon  a  reserve  so  vast — equal- 
ling that  of  the  greatest  banking  institution  in  the  world — 
by  his  policy  broke  the  banks,  suspended  cash  payments  at 
the  Treasury,  and  then  proposed  to  supersede  the  existing 
banks  with  new  ones,  organized  under  his  own  immediate 
supervision,  and  subject  to  the  Treasury  Department. 

And  I  will  here  say,  in  justice  to  the  officers  of  the  banks 
of  New  York,  Philadelphia  and  Boston,  that  the  union  of 
these  banks,  and  the  inception  and  completion  of  the  ar- 
rangements for  making  the  loans  to  government,  all  originated 
with  the  bank  officers.  Mr.  Chase  was  in  no  way  the  author 
of  the  movement.  All  he  had  to  do  was  to  come  to  New 
York  and  meet  the  representatives  of  the  banks,  and  sign  the 
requisite  papers  completing  the  loans.  All  that  he  did 
was  to  insist  upon  drawing  their  specie  from  them  for  the 
proceeds  of  the  loans,  which  the  most  experienced  bank 
officers  told  him  must  result  in  disaster  and  in  the  suspension 
of  specie  payments.  This  measure,  so  disastrous  to  all  con- 
cerned, and  the  new  banking  scheme,  altered  from  the  New 


81 

York  system,  appear  to  be  the  only  financial  measures 
originated  by  the  Secretary,  which  stand  forth  in  bold  relief 
before  the  country. 

In  his  internal  revenue  system  he  has  failed  as  disastrously 
as  he  has  in  his  currency  theories.  He  was  urged  by  mer- 
chants of  New  York,  Boston,  &c.,  to  adopt  an  internal 
revenue  tax  upon  sales  of  merchandise,  calculated  to  give 
him  one  hundred  and  fifty  millions  a  year,  but  instead  of 
that  we  have  a  complicated  system,  employing  an  army  of 
revenue  officers,  with  one  of  the  most  expensive  systems  of 
assessorships,  collection  districts,  &c.,  &c.,  that  ever  oppressed 
a  tax-ridden  people.  That  ridiculous  and  absurd  "job"  of 
engraving  revenue  stamps  of  the  various  sums  for  each  and 
every  kind  of  document,  at  a  heavy  expense  to  the 
country,  prohibiting  the  use  of  any  but  the  stamp  designated 
for  the  document  upon  which  it  was  made  to  be  applied,  is 
a  fair  illustration  of  that  shameful  ignorance  governing  our 
national  affairs  at  the  outset  of  our  troubles.  But  the  failure 
of  his  internal  revenue  is  unquestionably  owing  more  to  the 
imperfect  execution  of  the  law  than  the  failure  of  the  re- 
sources of  the  people  to  respond  to  its  requirements.  Why 
is  not  the  law  enforced  ? 

As  to  what  he  says  of  "  vigor  in  the  prosecution  of  the 
war,"  and  "  economy  in  every  branch  of  expenditure,"  whose 
fault  is  it  that  they  have  not  been  secured  ?  Is  he  not  one 
of  the  government,  responsible  for  "vigor"  as  well  as 
"  economy  ?"  It  is  not  possible  for  one  member  of  a  cabinet 
to  escape  the  responsibility  belonging  to  an  administration 
of  which  he  continues  a  member.  If  affairs  go  wrong,  he 
should  resign,  if  he  desires  to  escape  censure  for  the  mis- 
management of  his  colleagues.  He  says :  "  Nor  is  rashness 
in  war  vigor."  To  whom  this  alludes  it  is  difficult  to  con- 
jecture. 

As  to  the  "  direct  contributions"  required  from  the  people, 
they  can  only  be  secured  by  taxation,  and  if  the  customs  are 
likely  to  fail  in  yielding  enough  to  pay  the  interest  on  the 
debt,  the  internal  taxes  can,  by  legislation,  be  made  payable 
in  gold  or  its  equivalent. 


32 

The  great  increase  of  debt  which  he  deplores  was  easily 
avoided,  to  a  considerable  extent,  had  he  chosen  to  refrain 
from  paper  issues,  so  that  prices  would  have  been  kept  down. 
Instead  of  twenty-two  hundred  millions,  on  the  30th  of  June, 
1865,  as  it  probably  will  be,  he  might  have  kept  it  at  fifteen 
hundred  millions  by  that  date  had  he  refrained  from  his  ex- 
cessive issues  of  paper  and  put  his  loans  on  the  market. 
But  having  broken  the  banks,  there  was  not  skill  enough  in 
his  department  to  make  the  specie  of  the  country  available 
for  a  sound  currency ;  and  now,  much  of  our  safety  in  the 
future  depends  upon  the  state  of  the  crops  and  of  the  con- 
tinuance of  peace  in  Europe,  for  we  are  almost  at  the  mercy 
of  the  banks  of  England  and  France  with  our  inflated  paper 
system,  the  premium  on  gold  liable  to  be  urged  up  to  high 
rates  by  the  application  of  an  increase  in  the  rates  of  interest 
in  England  and  France,  or  favorable  crops  in  Europe  drain- 
ing us  of  coin.  The  export  of  our  coin  continues  in  large 
volume,  under  that  boasted  "  uniform  currency"  which  the 
Secretary  lauds  so  highly,  with  gold  at  fifty  per  cent,  pre- 
mium, and  "  green  backs"  quoted  at  thirty-three  discount  at 
San  Francisco.  In  fact,  we  have  had  no  "uniform  currency" 
since  his  policy  compelled  the  suspension  of  the  banks. 

The  pressing  urgent  necessity  of  "taxation"  is  well  proved 
by  what  took  place  in  1861,  when  a  Committee  of  Bank 
Officers,  then  assembled  at  Washington,  urged  Congress  to 
pass  a  joint  resolution  in  favor  of  adequate  taxation.  That 
resolution  revived  public  confidence  instantly. 

The  "sacred  obligation  that  not  one  man  should  be  wasted 
and  not  one  dollar  misapplied,"  is  not  generally  felt  as  it 
should  be,  it  is  to  be  feared,  especially  among  those  who 
have  the  making  of  laws  governing  expenditures.  But  the 
Secretary  does  well  to  remind  his  readers  of  it.  There  are 
other  "obligations,"  however,  which  seem  to  sit  lightly  upon 
our  public  men,  and  among  these  is  one  which  Tie  might 
have  discharged  by  at  least  an  acknowledgment  of  the  servi- 
ces rendered  to  him  and  the  goverment  by  the  Banks  of  the 


three  cities,  when,  unable  to  move  hand  or  foot,  the  govern- 
ment was  exclaiming  with  the  ancient  Eoman, 

"Help  me  Cassius,  or  I  sink!" 

% 

he  came  to  New  York,  was  received  so  patriotically  and  so 
liberally  supported.  That  dark  hour  of  the  country's  history 
had  only  one  parallel.  That  was  in  1780,  in  the  spring- 
memorable  for  the  accumulated  misfortunes  which  threaten- 
ed to  overwhelm  the  young  republic,  or  to  strangle  it  in  its 
infancy.  Charleston,  the  key  to  the  Carolinas,  had  fallen  into 
the  hands  of  the  British.  There  was  no  money,  very  little 
credit,  and  much  apprehension  as  to  the  future,  especially 
in  the  army,  where  only  the  fortitude  of  Washington,  his 
pure  patriotism,  and  unsullied  character,  with  the  holiness 
of  their  country's  cause,  restrained  the  men  from  throwing 
down  their  arms  in  despair !  It  was  the  gloomy  midnight 
hour  of  our  revolutionary  struggle.  Washington  wrote  to 
the  Legislature  of  Pennsylvania,  which  happened  to  convene 
at  an  unusual  time — the  month  of  May — at  Philadelphia, 
the  Congress  not  being  in  session.  Washington's  letter  in- 
formed the  Assembly,  in  substance,  that  notwithstanding 
the  confidence  he  felt  in  the  attachment  of  the  army  to  the 
cause  of  the  country,  the  distress  which  existed  throughout 
the  ranks  for  the  want  of  every  thing  which  men  could  be 
destitute  of,  had  become  so  overwhelming,  and  the  appear- 
ances of  mutiny  and  discontent  were  so  strongly  marked  on 
the  countenance  of  the  army  that  he  dreaded  the  event  of 
every  hour.  This  letter  was  followed  by  despairing  silence 
in  the  House.  J$o  one  spoke  for  some  time.  At  length  one 
member  rose.  "  If,"  said  he,  "  the  account  in  that  letter  is  a 
true  state  of  things,  and  we  are  in  the  situation  there  repre- 
sented, it  appears  to  me  in  vain  to  contend  the  matter  any 
longer.  We  may  as  well  give  up  at  first  as  last." 

Another  member,  with  more  courage,  observed :  "  Well, 
well,  do'nt  let  the  House  despair,  if  things  are  not  so  well  as 
we  wish,  we  must  endeavor  to  make  them  better."  The 
House  adjourned  without  doing  any  thing  farther.  What 

3 


34: 

conld  they  do?  Members  had  come  to  the  session  with 
petitions  from  the  people,  asking  to  be  released  from  pay- 
ment of  taxes.  No  money  in  the  treasury,  the  paper  money 
depreciated  so  low  as  to  be  almost  worthless.  In  fact,  the 
public  credit  was  wholly  unequal  to  the  awful  crisis.  The 
taking  of  Charleston  let  loose  a  large  British  force  to  return 
and  join  that  at  New  York.  Washington's  army  needed  ten 
thousand  more  men  at  least,  besides  the  actual  necessaries 
of  life.  Happily,  capitalists  were  found  in  Philadelphia 
equal  to  the  emergency.  Blair  McClenaghan,  an  energetic 
merchant,  took  a  subscription  list,  called  to  his  aid  the 
celebrated  Robert  Morris,  each  subscribing  "  two  hundred 
pounds  in  hard  money," — the  paper  money  had  nearly  gone 
under, — and  they  raised  in  all  "four  hundred  pounds  hard 
money,  and  one  hundred  and  one  thousand  three  hundred 
and  sixty  pounds  continental,"  for  bounties  to  promote  re- 
cruiting. A  general  meeting  of  citizens  was  called.  A 
bank  was  formed.  By  means  of  this  bank  the  army  was  sup- 
plied through  the  campaign,  was  recruited  and  enabled  to 
keep  its  ground.  Robert  Morris  was  appointed  superinten- 
dent of  the  finances  and  perfected  the  organization  of  the 
bank  as  a  national  institution  —  the  celebrated  Bank  of 
North  America.  Congress,  when  it  met,  did  not  have  to 
receive  and  pass  into  law  the  request  of  a  Secretary  of  the 
Treasury  to  supersede  that  Bank  with  new  ones,  upon  a 
"pet  system"  of  his  own.  No,  on  the  contrary,  acting  on 
principles  of  patriotism  and  the  public  good,  they  cherished 
an  institution  which  had  rendered  such  signal  services  to 
Washington  and  his  army.  Pennsylvania  had  found  men  to 
organize  that  bank,  who  were  an  honor  to  the  state,  and 
whose  services  the  representatives  of  the  whole  Union  were 
proud  to  acknowledge.  That  was  in  1780.  How  like  the 
history  of  those  gloomy  days  of  1861,  when  members  of  the 
government  at  Washington,  stood  with  their  trunks  packed, 
uncertain  at  what  moment  the  rebel  horde  might  take  the 
capital  and  send  them  on  their  travels,  they  knew  not  whith- 
er. Without  money,  or  credit — without  an  army  or  navy — 


35 

treason  on  every  hand — not  knowing  whom  to  trust — the 
merchants  and  bankers  of  the  interior  paralyzed — one  great 
western  banker,  since  elevated  to  high  position  in  the  treas- 
ury department,  gathering  in  the  gold  into  his  coffers  and  re- 
fusing to  exercise  his  ability  to  aid  the  government.  Then, 
in  that  trying  hour,  the  merchants  and  bankers  of  Kew  York 
came  forward,  with  their  aid  and  council,  joined  by  those  of 
Boston  and  Philadelphia,  and  dispelled  the  gloom!  The 
country  was  saved!  And  the  Secretary  of  the  Treasury  was 
rescued,  individually  and  officially,  as  no  Finance  Minister 
was  ever  rescued  before.  But  the  service  appears  to  have 
not  been  worth  an  acknowledgment.  !^ay,  the  destruction 
of  the  very  institutions  which  aided  him  and  rescued  the 
country  from  rebellion  and  anarchy,  has  been,  ever  since, 
apparently,  his  settled  policy;  for  he  even  now  in  his  present 
report,  asks  that  they  be  absolutely  prohibited  from  having 
any  right  to  issue  circulating  notes,  as  provided  in  the 
national  banking  law,  in  exchange  for  stocks  deposited  at 
Washington,  proving  that  he  contemplates  adding  (new)  bank 
currency  to  (old)  bank  currency,  and  augmenting  the  inflation 
of  paper  money.  He  also  declares  that  the  relinquishment  of 
their  names  has  been  made  by  himself  a  condition  of  their 
reorganizing  under  his  national  law,  while  his  Comptroller 
of  the  currency  confesses  that  it  is  proposed  to  drive  out  or 
supersede  all  existing  banks  by  the  new  ones. 

Why  this  war  upon  the  old  banks  ?  The  people  do  not 
respond  to  it.  It  is  absolutely  restricted  to  the  halls  of  the 
Treasury  Department.  Every  effort  to  discredit  the  existing 
banks — all  attempts  to  excite  prejudice  against  them  by 
charging  them  with  sympathy  with  the  rebels — intimations 
of  partizan  hostility  to  the  administration — all  these  so  per- 
sistently brought  forward  by  the  paper  money  speculators, 
who  swarm  around  the  Treasury  Department  like  vermin 
on  the  banks  of  the  Kile,  have  failed  to  make  any  impression 
upon  the  public  miud.  In  fact  the  effort  to  get  up  a  parti- 
zan feeling  against  the  old  banks  is  a  failure.  It  is  worse  • 
than  a  failure,  it  has  proved  to  be  a  mistake !  It  was  too 


86 

transparent,  too  childish,  to  be  successful !  If  there  was  any 
cause  for  the  withdrawal  of  their  circulation,  in  order  to  give 
the  government  the  whole  field,  they  were  and  are  prepared 
to  second  the  proposition.  No  bank  or  bank  officer  has 
petitioned  Congress  against  it.  And  as  to  the  proposed 
national  law,  it  is  opposed  mainly  because  of  its  affording 
opportunities  for  fraudulent  banking — because  its  tendency, 
unless  amended  as  proposed,  must  be  to  supersede  the 
sound  systems  of  banking  that  were  growing  up  in  the 
principal  cities,  particularly  in  New  York,  with  that  un- 
steady, precarious  and  dangerous  system  which  had  so  long 
oppressed  and  plundered  our  people,  especially  in  the  new 
states.  It  was  this  successful  sound  banking  in  the  cities 
that  has  rendered  the  proposed  national  plan  at  all  possible. 
Every  state  bank  in  the  loyal  states  would  to-morrow,  mainly 
from  motives  of  patriotism,  reorganize  under  the  proposed 
national  law,  if  the  state  government  would  permit  it  to  do  so 
by  an  enabling  act,  and  if  the  national  law  were  amended  as 
proposed,  and  so  as  to  secure  the  proper  individuality  of  the 
banks  by  name.  There  is  no  desire  among  any  persons  con- 
nected with  existing  banks,  to  deprive  the  government  of  one 
dollar  of  circulation  which  may  be  obtained  for  relief  of  the 
country  by  such  bank  reorganizing  under  the  national  law. 
It  is  true  that  opinions  differ  as  to  the  practical  benefits  to 
result  from  the  new  law.  But  it  may  safely  be  asserted  as 
the  opinion  of  all  the  most  experienced  business  men  in  all 
parts  of  the  country,  that  the  establishment  of  banks  of  mere 
circulation,  is  an  injury,  not  a  benefit,  to  the  country ;  and 
that  whatever  advantage,  from  selling  stock  to  form  the 
basis  of  such  circulation,  may  result  to  the  government 
from  organizing  and  establishing  such  banks,  is  more  than 
lost  by  the  debasing  of  the  currency  and  the  reduction  of  our 
ability  to  meet  taxation,  arising  from  the  increased  use  of 
paper  money  issued  by  such  a  bank. 

It  is  most  assuredly  a  great  advantage,  if  by  adopting  any 
measure  the  stocks  of  the  government  may  be  made  thereby 
to  rise  in  value.  But  if  such  measure  be  founded  in  a  circu- 


37 

lating  medium  radically  vitiated,  tending  to  raise  the 
nominal,  not  the  real,  value  of  the  funds,  it  is  no  longer  en- 
titled to  approbation.  The  Secretary  boasts  of  creating  a 
home  market  for  our  stocks  by  his  measures,  but  really  he 
has,  by  his  issues  depreciating  the  currency,  made  a  premium 
of  fifty  per  cent,  on  the  money  of  the  foreigner — being  gold — 
sent  here  from  Europe  for  investment  in  our  securities ;  and 
whenever  we  resume  specie  payments  this  loss  to  our  own 
people  will  become  more  fully  apparent  to  them  than  it  is 
now,  the  present  premium  on  gold  making  the  interest  ob- 
tained for  loans  appear  larger  than  it  will  when  that  premium 
ceases. 

It  has  already  been  explained  how  the  new  national  system 
of  banking  may  be  made  safe  and^successful,  and  if  the  so- 
called  friends  of  the  administration  in  the  State  Legislatures 
are  real,  not  false  friends,  they  now  have  it  in  their  power  to 
prove  it  by  passing  enabling  acts  to  allow  the  old  banks  to 
reorganise  under  the  new  system.  Nay,  more,  if  the  ad- 
ministration, particularly  the  gentlemen  in  the  Treasury  De- 
partment, are  really  disposed  to  prove  that  they  do  not  seek 
to  add  to  the  paper  money  circulation  of  the  country  by  the 
creation  of  the  new  banks ;  if  all  they  want  is  to  have  the 
national  government  secure  the  sale  of  a  sufficient  amount 
of  stock  to  form  the  basis  of,  or  security  for,  the  whole  paper 
money  circulation  of  the  country,  they  now  have  the  oppor- 
tunity to  establish  the  fact  beyond  all  cavil  by  favoring  en- 
abling acts  in  the  State  Legislatures,  and  such  kindred 
legislation  by  Congress,  as  before  explained,  as  will  secure  a 
safe  and  practicable  national  system  of  banking. 

The  true  source  of  aid  to  the  government  is  to  be  found  in 
the  accumulation  of  wealth  by  the  people — in  the  savings  of 
labor — in  economy  by  individuals,  by  families,  communities, 
and  in  the  investment  of  such  savings  in  the  national  loans. 
There  can  be,  there  is  no  other  source  of  national  wealth. 
Any  system  of  "alchemy"  which  seeks  other  modes  of 
procuring  wealth,  is  as  delusive  as  the  schemes  of  the 
ancient  alchemysts,  sorcerers  and  astrologers,  and  is 


to  be  classed  with  the  tricks  of  the  magicians.  Benjamin 
Franklin  expressed  the  whole  secret  of  individual  and 
national  wealth  in  the  homely  phrase  "save  and  have!" 
But  people  cannot  save  without  a  currency  representing,  at 
par  with,  or  convertable  into,  the  precious  metals.  That  is 
impossible.  All  history  proves  this.  The  nation  that  relies 
upon  a  depreciated  currency  becomes  debtor  to  every  other 
nation  and  sinks  into  poverty  and  despicable  weakness. 
True,  a  paper  money  may  be  so  restricted  as  to  be  as  valua- 
ble as  gold,  for  it  is  in  one  sense  the  quantity  not  the  charac- 
ter of  a  paper  money  which  governs  its  value  as  compared 
with  the  precious  metals  and  the  currencies  of  other  coun- 
tries. Mr.  Chase  has  depreciated  our  currency  by  the 
excessive  quantity  he  has  issued,  of  legal  tender  paper 
money,  upon  the  mistaken  theory  that  by  making  money 
excessively  abundant,  the  people  would  be  forced  to  invest 
it  in  the  government  bonds  of  long  date.  Unfortunately  for 
this  theory,  the  very  excess  of  the  issues  tended  to  weaken 
public  confidence  in  the  financial  measures  of  the  depart- 
ment, and  also  made  it  more  profitable  to  use  the  money  to 
speculate  with,  during  the  rise  in  prices  created  by  each 
sucessive  issue.  Hence  the  tardiness  with  which  the  public 
entered  into  the  plans  of  the  Secretary  for  taking  up  his 
long  loans;  and  the  negotiation  only  became  successful  at 
last  from  the  overwhelming  victories  of  the  army,  presaging 
a  speedy  termination  to  the  rebellion.  As  early  as  May, 
1861,  he  was  earnestly  solicited  to  have  a  "systematic  and 
thorough  appeal"  made  throughout  the  Union  States,  by 
Postmasters,  newspapers,  &c.,  in  favor  of  subscriptions  to 
the  national  loans,  and  with  a  view  to  avoid  the  excessive 
issues  of  paper  money ;  but  he  saw  fit  to  confer  upon  certain 
favored  individuals  this  important  duty,  rewarding  them 
with  lucrative  commissions,  which,  however  small  on  each 
hundred  dollars  sold,  must  have  already  amounted  to 
immense  sums,  in  consequence  of  the  many  millions  to 
which  the  loan  has  been  sold. 
Notwithstanding  the  vein  of  self-laudation  in  the  Report, 


39 

leading  one  to  infer  that  he  has  been  enabled  to  supply  all 
the  financial  resources  needed  by  government  under  the 
legislation  sought  \yy  him  and  passed  by  Congress,  he  was 
again  compelled  to  apply  to  the  banks  of  the  three  cities,  as 
late  as  September,  1863 — the  very  banks  which  his  "national 
banking  system,"  as  explained  by  his  Comptroller  of  the 
Currency,  is  intended  to  crush  out  of  existence.  Again  those 
banks  responded  heartily  to  his  call,  and  once  more  saved 
him  from  bankruptcy  or  ruinous  delays  in  making  the  pay- 
ments of  his  department.  Yet,  in  the  Eeport  which  he  pre- 
sented to  Congress,  at  the  opening  of  the  session  in  Decem- 
ber, lie  again  brought  forward  the  project  of  "  discrimina- 
tion" against  these  banks,  and  in  "favor  of  the  national 
associations,"  as  if  he  had  determined  to  drive  the  former 
out  of  existence,  or  so  load  them  with  taxation,  in  addition 
to  the  taxes  already  levied  from  them,  that  they  must  either 
wind  up  or  go  into  the  new  system,  alleging  that  the  notes 
of  the  new  banks  are  "  capable,  at  no  distant  period,  of 
being  made  equal  to,  and  convertible  into  coin,"  but  with- 
holding the  fact,  that  the  notes  of  the  State  banks  were  re- 
deemed in  coin  until  he,  instead  of  drawing  upon  them  for 
his  disbursements,  and  employing  them  as  agents  to  make 
his  disbursements,  as  the  law  provided,  drained  them  of  their 
specie.  Had  he,  before  he  drew  the  coin  from  the  banks, 
drawn  upon  them  direct  for  the  proceeds  of  the  loans  taken 
by  them,  and  not  transferred  the  coin  of  the  banks  to  the 
Sub-Treasury,  the  coin  would  have  remained  in  the  banks  as 
heretofore  to  constitute  the  foundation  of  the  credit  system  of 
the  whole  country,  individual  as  well  as  national.  It  seems 
almost  needless  to  remark,  that  the  drafts  of  the  Treasury  on 
the  banks,  as  all  business  men  know,  were  susceptible  ot 
being  transferred  from  hand  to  hand,  like  other  instruments 
of  credit :  they  would  have  been  a  transferable  and  trans- 
missible medium,  circulating  as  a  representative  of  value, 
available  for  all  payments  of  the  government,  whether  of 
large  or  small  amounts.  By  this  plain  method  he  would 
have  saved  the  employment  of  the  precious  metals,  and  a 


40 

Very  cheap  instrument  of  payment  would  have  been  substi- 
tuted for  a  very  expensive  one.  These  drafts,  being  repre- 
sentatives of  coin,  would  have  served  all  the  purposes  of  coin 
in  the  ramifications  of  our  internal  trade  and  commerce,  and 
the  final  payment  of  them,  as  experience  in  banking  proves, 
could  have  been  adjusted  at  the  Bank  Clearing  Houses  with- 
out the  removal  of  the  coin  from  the  banks.  Nay,  more, 
they  would  have  been  converted  into  cash  on  presentation  at 
the  banks,  and  on  the  faith  of  this  convertibility  they  would 
have  passed  as  cash.  The  public  had  full  confidence  in  the 
banks,  and  would  not  have  made  a  run  upon  them  for  gold, 
knowing  that  the  paper  of  the  banks  and  the  drafts  upon 
them  were  secured  by  ample  funds.  There  would  also  have 
been  another  immense  advantage  gained  by  this  method  of 
using  drafts  for  government  payments  instead  of  specie,  in 
the  difference  between  a  quick  and  a  slow  circulation,  which 
Mr.  Chase  does  not  seem  to  have  thought  of.  "The  quantity 
of  money  necessary  for  performing  a  certain  number  of  ex- 
changes in  a  certain  time  may  be  considered  nearly  as  in  the 
inverse  ratio  of  its  velocity  of  circulation ;  whatever,  there- 
fore, tends  to  accelerate  the  general  rate  contributes  to  econo- 
mise the  necessary  quantity :"  so  that  if  from  any  cause  the 
rate  of  circulation  be  impeded,  as  it  is  in  the  case  of  em- 
ploying and  transporting  the  precious  metals,  a  much  larger 
quantity  of  money  is  required.  If  we  take  the  single  case 
of  a  city,  as  London  or  New  York,  it  would  be  utterly  im- 
possible to  transact  the  monetary  affairs  of  either,  at  their 
present  volume,  if  coin  were  exclusively  used.  There  would 
not  be  room  enough  in  the  public  streets  for  the  wagons, 
carts  and  drays  that  would  be  employed  in  carrying  the  coin 
through  the  city,  to  and  between  the  banks,  railway  stations, 
steamboat  landings,  and  the  offices  and  counting  houses  of 
the  merchants,  bankers  and  traders.  Yet  it  was  upon  this 
system  of  carting  and  hauling  specie  for  his  payments  that 
the  Secretary  commenced  to  manage  his  department,  and 
continued  for  several  months  to  manage  it,  at  the  breaking 
out  of  the  rebellion.  Hence  the  draining  of  the  banks,  to 


the  extent  of  one  hundred  and  seventy  millions  of  coin  by 
the  Secretary.  It  is  impossible,  therefore,  that  the  new  sys- 
tem of  banking  can  be  successful,  unless  it  is  so  managed, 
and  so  directed  by  the  legislation  of  Congress,  as  to  bring  us 
back  nearer  to  the  specie  standard,  and  this  is  only  to  be 
done  by  contracting  the  paper  issues,  the  revulsion  that 
must  ensue  will  not  be  so  severe,  if  the  Secretary  so  guides 
it  as  to  make  it  gradual,  as  is  generally  apprehended ;  for  we 
have  already  witnessed  a  fall  in  gold  from  seventy-two  per 
cent,  premium  to  twenty-one  per  cent,  within  a  few  months — 
less  than  a  year — without  serious  injury  to  the  general  public, 
the  principal  sufferers  being  those  immediately  interested  in 
speculations  in  that  metal. 

XI.  The  Financial  Revulsion  to  come  from  excessive  issues  of 
Paper  Money.— Can  it  be  averted  or  its  severity  mitigated?— 
Suggestions  for  mitigating  it. 

That  an  over  issue,  or  an  excessive  issue,  of  paper  money 
produces  a  financial  revulsion,  sooner  or  later,  is  a  well 
established  law  of  finance.  So  far  as  the  excessive  issues 
of  the  paper  money  of  government  may  cause  such  a  revul- 
sion, the  apology  of  imperative  necessity  is  the  only  real 
defence  that  Mr.  Chase  has  to  offer,  and  it  is  his  best  de- 
fence, because  it  is  patent  to  every  man  that  the  issues  have 
been  excessive  and  the  arguments  of  the  Secretary  to  the 
contrary  are  contradicted  by  the  facts.  The  Department 
had  not  sufficient  skill  in  finance  to  organize  the  Sub-treas- 
ary  to  meet  the  crisis.  So  far  as  the  paper  money  of  the 
banks  is  concerned,  that  has  remained  nearly  uniform,  but 
it  would  be  a  great  benefit  to  the  country  if  by  any  lawful 
means  the  creation  of  more  banks  of  issue  could  be  pre- 
vented. Banks  of  issue  are  not  required.  There  is  really 
no  necessity  for  having  another  one  established.  There  are 
already  too  many ;  for  the  influence  to  be  exerted  by 
creating  more  bank  note  currency  must  be  an  extension  of 
the  inflation  of  paper  money,  and  the  consequent  increase  of 
ruin  and  disaster  —  and  the  increase  of  pauperism  and 


42 

crime — which  will  accompany  or  flow  from  the  terrible 
revulsion  that  must  ensue.  To  avert  this  revulsion,  or  to 
mitigate  its  severity,  would  seem  to  be  greatly  within  the 
power  of  the  Secretary.  The  first  mode  is  to  use  his  influ- 
ence, and  [procure  the  assistance  of  Congress  and  the  state 
legislatures,  in  favor  of  organizing  all  the  state  banks,  with 
their  present  names  and  existing  assets,  under  the  general 
law,  with  specie  reserves,  and  under  the  regulations  already 
suggested.  These  banks  could  then  transform  themselves 
into  National  Institutions,  withdrawing  their  present  circu- 
lation and  replacing  it  with  that  secured  by  United  States 
stocks.  By  this  course  we  may  avoid  a  repetition  of  that 
deplorable  rivalry  which  was  witnessed  in  the  case  of  the 
last  United  States  Bank,  of  Pennsylvania,  and  the  "Pet 
Banks,"  which  culminated  in  the  disastrous  revulsion  of  1837. 
In  the  course  which  we  are  now  taking,  by  organizing 
new  national  banks  to  add  to  the  circulating  medium,  we 
are  only  impoverishing  ourselves,  exactly  as  every  country 
that  relies  upon  paper  money  in  excess,  impoverishes  itself  to 
the  enriching  of  the  countries  having  a  currency  regulated 
by  the  precious  metals.  We  have  seen  this  already  in  the 
case  of  England  and  France,  which  are  steadily  draining  us 
of  the  precious  metals,  and  thus  undermining  the  foundation 
of  our  whole  financial  superstructure.  People  say:  "no  one 
can  eat  gold — let  it  go — we  can  get  along  very  well  without 
it — we  can  do  with  paper."  True,  we  cannot  eat  gold,  but 
the  people  we  send  our  gold  to,  principally  for  luxuries,  are 
able  with  that  gold  to  supply  themselves  with  wealth,  or  the 
elements  of  wealth;  and  as  to  our  getting  on  very  well 
without  gold,  we  have  seen  the  consequences  of  such  asser- 
tions in  the  ruin  of  the  rebel  finances  at  Eichmond.  Again, 
we  have  very  recently  found  ourselves  disappointed  in  the 
volume  of  our  exports,  the  late  plentiful  harvests  in  Europe 
having  reduced  the  exchangeable  value  of  our  grain,  and  if 
another  similar  harvest  should  be  enjoyed  by  Europe  next 
season,  coincident  with  a  falling  off  in  our  own  from  the 
withdrawal  of  so  many  of  our  people  from  productive  indus- 


43 

try,  what  is  to  be  the  consequence  of  the  drain  of  the  pre- 
cious metals  lasting  so  long  ?  To  stop  this  drain  as  soon  as 
possible  should  be  the  earnest  aim  of  the  government.  It 
can  be  stopped  to  some  extent  by  getting  forward  the  pro- 
ductions of  the  reclaimed  states,  especially  the  cotton  and 
sugar.  If  we  can  secure  this  year  only  one  million  bales  of 
cotton,  leaving  out  of  count  the  sugar  of  Louisiana,  that 
quantity  at  present  prices  would  equal  in  value  the  four 
millions  of  bales  we  have  been  accustomed  to  export  in 
former  years,  from  the  crop  of  a  single  year.  Hence  the 
great  importance  of.  moving  vigorously  with  our  military 
and  naval  force  in  the  occupation  of  as  large  a  part  of  the 
cotton  growing  region  as  possible. 

Another  source  of  internal  development  is  the  encourage- 
ment of  immigration  :  our  recovery  from  the  revulsion  of 
1837,  was  greatly  owing  to  this  element  of  industrial  power ; 
and  so  far  as  government  can  legitimately  extend  its  aid,  it 
should  do  so,  to  encourage  the  emigration  thither  of  the 
surplus  labor  of  other  countries. 

But.  it  is  upon  the  course  of  the  Secretary  that  we  must 
rely  in  a  great  degree  for  averting  or  mitigating  the  financial 
revulsion  for  which  his  excessive  issues  of  paper  money  are 
preparing  the  way.  By  contracting  or  holding  back  his  paper 
issues,  as  he  receives  them  in  payment  for  long  bonds,  he  can 
divert  the  whole  savings  of  the  country  from  all  other  classes 
of  permanent  investments  into  the  national  loan,  while,  with 
his  interest-bearing  notes — which  ought  not  to  have  been 
made  a  legal  tender — he  may  absorb  a  considerable  portion 
of  the  floating  capital,  if  not  the  whole  of  it.  In  this  way 
the  people  may  be  prevented  from  that  resort  to  the  credit 
system  so  fruitful  of  revulsion ;  and  it  would  be,  in  the  pre- 
sent state  of  the  country,  a  great  favor  to  the  people  to  pre- 
vent abuses  of  the  credit  system.  Every  man  should  now 
try  to  get  out  of  debt,  and  keep  out  of  it.  By  doing  so  he 
confers  upon  the  nation  the  power  of  using  all  the  available 
credits  for  the  war. 

As  to  the  interest-bearing  legal  tender  notes,  it  is  extremely 


44 

desirable  that  they  should  be  introduced  upon  the  market  in 
small  quantities,  and  at  the  longest  possible  intervals ;  for  I 
apprehend  that  the  making  of  them  a  legal  tender,  with  their 
introduction  in  large  volume  at  any  one  time,  will  produce 
the  same  effects  that  would  follow  the  addition  of  a  similar 
quantity  of  notes  not  bearing  interest.  For  some  months 
after  their  issue  they  will  undoubtedly  be  used  as  money. 
This  would  have  been  avoided  had  they  not  been  made  a 
legal  tender,  and  I  trust  that  Congress  will  consider  the  pro- 
priety of  abolishing  this  characteristic  as  regards  the  amount 
not  yet  issued ;  for,  in  case  of  a  great  demand  for  money, 
they  are  liable  to  be  circulated  at  their  face  value,  regardless 
of  the  interest  upon  them.  In  France,  when  the  assignats 
were  discredited,  resort  was  had  to  the  issue  of  mandats, 
bearing  interest,  in  the  hope  that  these  latter  would  be  with- 
held from  circulation  for  the  sake  of  the  interest,  but  that 
hope  failed,  and  the  public  used  the  mandats  as  a  circulating 
money,  thus  hastening  the  final  catastrophe  which  overtook 
the  finances  of  the  nation. 

If  it  be  deemed  advisable  not  to  exact  the  internal  revenues 
in  coin,  now  that  the  interest  payable  in  coin  upon  the  public 
debt  approaches  the  sum  total  receivable  in  coin  for  duties 
on  imports,  it  may  be  expedient  to  provide  for  paying  the 
interest  in  legal  tender  paper  upon  loans  hereafter  authorized, 
although  it  would  be  more  conducive  to  a  high  state  of  public 
credit  to  exact  all  the  revenues  in  coin,  or  its  equivalent,  and 
pay  the  interest  on  all  kinds  of  public  securities  with  coin. 
We  shall  lose  prestige,  as  a  nation,  by  every  departure  from 
the  true  policy  of  paying  our  interest  in  the  currency  of  the 
world — the  precious  metals.  If  the  resumption  of  specie 
payments  upon  all  obligations  of  the  government  be  deemed 
impracticable,  except  at  a  very  remote  period,  by  limiting 
the  amount  of  interest  payable  in  coin  to  an  amount  nearly 
corresponding  with  the  customs'  duties,  issuing  other  debt 
bearing  interest  in  paper,  resumption  at  an  early  day  might 
be  facilitated,  although  it  is  somewhat  doubtful  if  it  would. 

Much  has  been  said  about  preventing  our  securities  from 


45 

going  into  the  hands  of  foreigners,  and  it  is  strange,  if  all 
that  has  been  said  were  intended  to  be  taken  as  it  seems  to 
have  been  meant,  that  Congress  has  not  been  requested  to 
pass  an  act  to  prevent  foreigners  buying  any  of  our  national 
securities.  Xow,  the  case  of  a  new  country,  requiring 
capital,  is  very  different  from  that  of  an  old  country,  having 
a  surplus  of  capital.  If  we  did  not  require  capital  to  de- 
velop our  vast  resources,  then  it  might  be  an  evil  to  have 
foreigners  send  their  capital  here ;  but  as  we  get  capital  from 
them,  and  they  draw  only  the  interest  from  us,  and  as  we 
have  the  use  of  the  capital  while  it  remains  with  us,  the  ad- 
vantage must  be  in  our  favor,  so  long  as  capital  can  be 
profitably  employed  among  us.  Those  who  scout  the  idea 
of  permitting  foreigners  to  invest  in  our  national  loans,  seem 
to  forget  which  side  of  the  Atlantic  they  are  on,  as  the  cir- 
cumstances which  would  justify  their  conclusions  would  re- 
quire us  to  be  on  the  other  side  of  the  Atlantic,  putting 
money  in  American  securities,  and  not  on  this  side  of  the 
Atlantic,  receiving  the  money  of  the  older  nations  which 
have  excessive  accumulations  of  capital.  To  complain  that 
foreigners  will  draw  interest  from  us  on  capital  loaned  us, 
"  is  like  a  miller  complaining,  in  a  season  of  drought,  that  so 
much  water  runs  into  his  mill-dam  that  some  of  it  runs  over." 
Besides,  is  it  not  true,  that  where  people's  treasure  is,  there 
will  they  feel  a  desire  for  the  prosperity  of  the  people  ?  and 
thus,  by  uniting  the  people  of  other  countries  to  us  with  our 
debt,  we  gain  their  good  wishes. 

XII.  Importance  of  a  Sound  Currency,  Equal  To,  or  Based  Upon, 
the  Precious  Metals— Illustrations,  Examples,  &c.— The 
Glorious  Prospects  of  Our  American  Future— Conclusion. 

It  was  a  prevalent  superstition  in  the  dark  ages,  that 
money  was  the  great  desideratum  in  all  aspirations  after 
national  or  individual  wealth.  Hence  the  customs  of  hoard- 
ing, debasing  the  metallic  currency,  and  directing  national 
policy  so  as  to  accumulate  money.  Diffusion  of  knowledge 
among  the  people  has  dispelled  that  ignorance.  It  is  now 


46 

found  that  the  nations  which  absorb  and  hoard  most  of  the 
money  of  the  world  are,  and  always  must,  remain  the  poor- 
est ;  and  that  those  nations  are  the  richest  which  keep  their 
stocks  of  money  sufficiently  limited  to  prevent  their  markets 
being  the  best  of  all  the  world  to  sell  in,  and  the  worst  of  all 
the  world  to  buy  in.  No  device  of  man  has  been  able  to 
perfect  any  kind  of  money,  to  accomplish  the  best  objects 
of  society,  except  that  composed  of  the  precious  metals,  or 
equal  to,  or  representing  these,  or  convertible  into  them  on 
demand.  These  metals  constitute  a  standard  of  value  inde- 
pendent of  the  will  or  caprice  of  any  man.  The  measure 
of  their  value  is  the  quantity  which  the  Creator  has  made  in 
the  earth,  accessible  to  human  labor.  The  stamp  on  a  piece 
of  coin  does  not  add  to  its  value,  but  only  to  its  convenience 
for  use.  Take  away  the  stamp  and  the  value  remains.  Not 
so  with  paper — it  is  too  plentiful — it  can  be  had  for  a  trifle. 
It  has  no  value  in  itself. 

Fraud  and  oppression  have  generally  characterized  paper 
money.  Scheming  knaves  have  used  it  to  cheat  the  public 
or  defraud  their  creditors;  and  even  honest  people,  compelled 
to  submit  to  its  use,  are  made  the  instruments  of  adding  to 
its  iniquitous  power,  by  their  efforts  to  get  rid  of  it,  in  ex- 
change for  tangible  property,  so  as  to  avoid  being  the  last  to 
hold  it  when  the  crash  comes.  At  the  present  moment  we 
see  our  people,  under  the  influence  of  an  expansion  of  legal 
tender  paper,  speculating  wildly  in  property  of  all  kinds, 
each  one  trusting  that  he  will  be  luckier  than  his  neighbor, 
and  not  get  caught  with  fictitious  values  in  a  falling  market, 
when  the  revulsion  sets  in.  We  thus  see  the  phenomena  of 
the  gambling  saloon  in  all  our  marts  of  trade  and  finance. 
It  is  a  lottery  of  property,  on  a  vast  scale ;  as  Thomas  Jef- 
ferson said :  "  paper  money  makes  a  lottery  of  all  private 
property." 

Although  banks  have  frequently  improperly  expanded 
their  issues,  and  thus  depreciated  the  currency,  yet  there  is 
a  wide  distinction  between  paper  money  that  is  payable  in 
coin  on  demand  and  that  which  is  not  so  payable.  In  the 


47 

case  of  bank  paper,  the  banks  are  compelled,  unless  govern- 
ment frees  them  from  the  obligation,  to  procure  and  keep 
gold  and  silver  to  pay  their  notes  with,  and  if  these  are  not 
in  the  country,  the  banks  send  to  other  countries  and  bring 
them  here.  But  in  the  case  of  a  government  paper  made  a 
legal  tender,  not  redeemable  in  coin,  the  gold  and  silver 
money  are  driven  out  of  the  country  by  it.  Paper,  not  re- 
deemable in  coin,  is  therefore  the  dearest  or  most  costly  kind 
of  money  that  a  nation  can  use,  because  it  drives  away  the 
real  money,  which  is  so  much  wealth  lost  to  the  country, 
since  the  people  must  bring  it  back  again,  or  procure  an 
equal  amount  of  it  in  exchange  for  an  equal  amount  of  wealth, 
before  the  currency  can  be  restored  to  its  sound  and  safe 
condition.  It  is  evident,  therefore,  that  no  government, 
which  consults  the  true  welfare  of  the  people,  will  persist 
long  in  forcing  them  to  use  an  irredeemable  currency.  It  is 
the  boast  of  our  republican  system  of  government,  that  it 
unites  authority  with  usefulness ;  in  brief,  that  it  is  made  for 
the  people.  Under  monarchial  and  despotic  forms,  govern- 
ments too  often  act  upon  the  principle  that  the  people  are 
made  for  the  ruler  or  his  dynasty.  Hence  the  abuses  of  au- 
thority under  the  latter,  and  the  sedulous  regard  for  the 
welfare  of  the  people  under  the  former. 

Dr.  Bollman,  depicting  the  state  of  affairs  in  the  south  of 
Germany,  half  a  century  ago,  when  the  depreciated  paper  cur- 
rencies fluctuated  twenty  or  thirty  per  cent,  in  twenty-four 
hours,  remarked  :  "As  soon  as  it  ( the  currency)  begins  to  fluc- 
tuate we  find  the  prices  of  all  commodities  unsettled.  Con- 
tracts on  time  can  no  longer  be  entered  upon  with  any  degree 
of  safety.  The  doubtful  state  of  things  paralyses  the  usual 
business.  As  depreciation  makes  progress,  conscientious- 
ness and  delicacy  of  conduct,  whenever  property  is  con- 
cerned, vanish.  Good  faith  in  trades  exists  no  longer.  The 
moral  principle,  to  which  steadiness  and  order  are  alone 
congenial,  gives  way.  Men  in  office  conceive  that  they  have 
a  right  to  indemnify  themselves  by  indirect  means  for  the 
loss  they  suffer  in  consequence  of  the  diminished  value  of 


48 

their  appointments.  Men  in  business  seize  every  advantage 
they  can  to  repair  past  losses,  against  which  they  could  not 
guard,  or  to  make  provision  against  those  with  which  they 
conceive  themselves  threatened.  The  practices  of  cheating 
and  overreaching  spread.  Establishments  requiring  large 
investments,  and  of  which  the  returns  are  late  and  gradual, 
languish,  and  are  at  last  discontinued.  All  important 
operations  of  distant  emoluments  are  neglected.  The  whole 
nation  seems  at  last  to  exist  only  from  day  to  day.  All  is 
gambling.  A  mean  traffic,  and  paltry  speculations  in  the 
depreciated  currency,  are  the  prevailing  pursuit.  Character 
gives  no  longer  credit.  Honesty  is  useless.  A  total  per- 
version of  all  rule  obtains.  While  fair  men  suffer,  bad  men 
thrive.  Brokers  and  usurers  fatten  on  the  diseased  body 
politic.  Magistrates  become  now  habitually  corrupt  ; 
justice  venal,  and  protection  uncertain."  To  this  state  of 
things — traced  in  still  bolder  features  in  France  and  in 
England,  as  well  as  parts  of  Germany — we  are  now  verging, 
with  this  difference,  that  all  commodities  among  us  have 
become  subjects  of  wild  speculation,  while  the  currency 
itself,  being  a  legal  tender,  remains  apparently  of  one  uniform 
value,  although  it  is  really  the  thing  that  fluctuates  in 
value  and  causes  all  other  things  to  follow  in  its  path. 

"We  are  now  congratulating  ourselves  upon  the  great  ap- 
parent prosperity  of  the  country,  and  organizing  new  banks, 
precisely  as  the  English  did  in  their  struggles  with  the 
French,  when,  in  seventeen  years,  between  1T93  and  1810, 
they  increased  their  banks  from  two  hundred  and  thirty  in 
the  former  year  to  seven  hundred  and  ninety-six  in  the  latter, 
the  paper  money  increasing  from  about  thirteen  millions  in 
1795  to  nearly  twenty-nine  millions  in  1814.  The  failures 
which  took  place  in  1816,  and  again  in  1825,  proved  how 
disastrous  had  been  the  inflation.  Shall  we  go  on  in  the 
same  path,  creating  new  banks  and  inflating  our  currency  ? 

An  abundance  of  paper  money  is  erroneously,  by  some 
parties,  supposed  to  reduce  the  rate  of  interest,  and  the  Sec- 
retary in  his  Keport,  speaks  of  the  average  rate  he  is  paying 


49 

on  the  public  debt,  "  without  regard  to  the  varying  margin 
between  coin  and  notes,"  as  less  than  four  per  cent,  in  Oc- 
tober last.  In  point  of  fact,  however,  gold  being  at  fifty 
premium,  he  is  paying  nine  per  cent,  on  his  six  per  cent,  bonds ; 
and  his  one  year  certificates,  being  at  two  per  cent,  under 
par,  yield  at  the  market  rate  eight  per  cent,  per  annum  ;  and 
in  estimating  his  increasing  debt,  he  overlooks  the  high 
prices  incident  to  the  excessive  issues  of  legal  tender  paper, 
as  one  of  the  main  causes  of  the  large  increase  of  the  national 
debt.  Indeed,  he  seems  to  view  the  distribution  of  these 
notes  as  an  element  of  "  national  unity  and  national  strength," 
because,  as  he  states,  "  every  holder  of  a  note  or  bond,  from 
a  five  cent,  fractional  note  to  a  five  thousand  dollar  bond, 
has  a  direct  interest  in  the  security  of  national  institutions, 
and  in  the  stability  of  national  administration."  Kow,  to 
assert  that  the  patriotism  of  the  people  required  the  excessive 
issues  of  legal  tender  notes  in  order  to  give  them  this  "  di- 
rect interest"  in  the  country's  welfare,  betrays  a  distrust  of 
that  patriotism,  which  the  Secretary,  on  mature  reflection, 
will,  no  doubt,  readily  disavow ;  for  no  where,  in  all  the  his- 
tory of  our  race,  have  people  evinced  so  much  patriotism  in 
pouring  out  their  life-blood  as  well  as  their  treasures,  in  sup- 
port of  their  nationality,  as  have  our  people  of  the  loyal 
States  in  this  struggle  with  an  infamous  rebellion. 

In  that  part  of  the  report  of  the  Secretary,  relating  to  the 
legal  tender  notes,  he  says:  "For  the  first  time  in  our 
history  has  a  real  approach  to  a  uniform  currency  been 
made ;"  and  that  it  "is  every  where  acceptable."  We  onca 
had  a  uniform  currency  of  gold  and  silver,  as  there  now 
exists  in  California,  where  the  Secretary's  currency  which 
he  terms  "uniform,"  is  quoted  at  thirty-three  per  cent,  below 
par.  It  is  unquestionably  true  that  the  depreciation  of  the 
legal  tender  paper  is  nearly  uniform,  as  far  as  notes  of  the 
same  denomination  are  concerned.  But  it  is  very  evident 
that  the  lofty  estimate  which  he  makes  of  the  practical 
benefits  of  the  legal  tender  currency,  issued  in  such  excess 
that  it  fluctuates  in  value  every  hour  of  the  day,  as  compared 
4 


50 

with  gold  and  silver  coin,  is  one  of  those  visions  by  which 
nien  have  been  so  often  misled  in  the  enthusiastic  pursuit 
of  a  favorite  theory.  It  is  the  very  essence  of  money  to 
possess  intrinsic  value,  and  on  this  account  the  precious 
metals  have  been  adopted  by  the  common  consent  of  man- 
kind, as  a  general  medium  of  exchange,  or  universal  equiv- 
alent. It  is  not  requisite  to  have  so  much  coin  in  a  country 
as  to  make  all  payments  in  these  metals,  althoilgh  this  seems 
to  be  a  view  of  the  Secretary,  who  pleads  the  urgency  of 
having  "money"  to  make  his  payments  with,  so  completely 
is  he  unacquainted  with  the  business  of  banking,  in  which 
checks,  drafts,  bills  of  exchange  and  book  accounts  are 
made  to  perform  the  functions  of  money  ;  and  had  he  been 
familiar  with  these  details  of  the  practical  "transactions  of 
finance,  he  had  in  the  one  hundred  and  twenty  millions  of 
coin  which  he  drew  from  the  banks,  a  basis  for  the  whole 
currency  of  the  country ;  the  foreign  exchanges  at  that  time 
were  all  in  favor  of  this  country,  and  gold  was  coming  to 
us  from  other  nations.*  The  use  of  coin  is  to  redeem  the 
notes  brought  in  for  payment,  and  thus  preserve  the  circula- 
tion equal  to  coin,  so  that  the  holder  of  a  note  should  always 
have  the  option  of  exchanging  it  for  coin  at  pleasure.  To 
satisfy  this  option,  experience  shows  that  it  requires  only  a 
moderate  portion  of  coin,  compared  with  the  whole  currency ; 
for  the  holder  of  a  note  payable  in  coin  is  generally  satisfied 
if  he  can  obtain  for  his  note  a  quantity  of  commodities 
equal  in  value  to  the  quantity  of  the  precious  metals  specified 
in  it. 

The  Secretary  also  expresses  his  gratification  at  the  de- 
cision made  by  the  Court  of  Appeals  of  New  York  in  favor 
of  the  constitutionality  of  the  legal  tender  act.  Let  us  con- 
sider the  situation  to  which  we  may  be  reduced,  should  the 
Courts  of  the  United  States  confirm  that  decision.  All 

*  In  the  speech  of  Mr.  Chase,  at  Indianapolis,  published  in  the  National 
Intelligencer  of  October  20,  1863,  he  said:  "I  borrowed  all  the  gold  there 
was  in  the  country.  In  this  way  I  obtained  about  one  hundred  and  seventy- 
five  millions  of  dollars  in  gold." 


property  and  contracts  would  at  once  be  governed  by  the 
increase  or  diminution  of  the  Secretary's  issues ;  there  would 
no  longer  be  any  other  measure  of  the  prices  of  property, 
the  monetary  standard  of  value  would  become  the  will  of 
the  Secretary,  and  his  individual  decisions,  as  to  whether  he 
should  call  ift  or  let  out  his  issues,  would  become  the  standard 
of  the  value  or  the  measure  of  the  wages  of  the  labor  and 
the  property  of  every  man,  woman  and  child  in  the  country. 
There  would  not  be  any  substance,  measure  or  weight  of  any 
kind  to  which  the  paper  money  could  be  referred  as  to  its 
value.  There  would  be  no  commodity  of  intrinsic  worth  for 
the  correction  of  the  quantity  of  paper  issued,  or  for  the 
maintenance  of  its  value.  The  paper  dollar,  in  legal  tender, 
might  one  day  be  worth  sixty  cents  and  the  next  day  only 
fifty,  or  go  down,  under  excessive  issues,  should  Congress 
repeal  the  limitations,  so  as  to  deprive  the  working  man  of 
half  the  reward  of  his  daily  toil  and  individuals  of  half  their 
property ;  for  the  moment  we  abandon  the  precious  metals 
as  the  constant  standard  of  reference,  there  is  no  limit  to  th# 
degree  of  depreciation  to  which  paper  circulation  may  in 
time  be  expected  to  descend.  Therefore,  if  the  principle 
which  Locke — book  on  government,  page  236 — states  be  just, 
"  that  the  preservation  of  property  is  the  great  end  for  which 
man  enters  into  society" — if  men  in  society  have  a  right  to 
their  property,  and  the  laws  of  the  community  confer  upon 
them  that  right — nobody  has  a  right  to  take  any  part  of  it 
from  them  without  their  consent ;  and  if  this  be  the  prin- 
ciple which  ought  to  regulate  intercourse  between  man  and 
man,  how  much  more  ought*that  principle  to  be  observed  by 
the  Legislature  itself,  to  whom  has  been  committed  one  of 
the  most  sacred  of  all  trusts,  and  whose  breach  of  any  sound 
and  salutary  principle  will  be  the  more  criminal,  in  propor- 
tion as  such  breach  will  be  more  extensively  mischievous. 
A  distinguished  writer  has  expressed  himself  with  peculiar 
emphasis  on  this  point.  He  says :  "  It  is  evident  that  every 
rise  (from  the  excess  of  paper  circulation)  in  the  money  price 
of  commodities  is,  in  other  words,  a  fall  in  the  commodity 


52 

price  or  exchangeable  value  of  money.  It  is  likewise  estab- 
lished by  experience,  and  before  actual  experience  might 
have  been  inferred  from  the  nature  of  the  thing,  that  every 
depreciation  of  the  value  of  the  circulating  medium  is  ac- 
companied with  much  inconvenience  and  distress 

The  value  of  monied  capital  is  diminished,  ana  the  livelihood 
is  injured,  of  all  those  persons  whose  income  is  limited  to  a 

fixed  sum  of  money The  grossest  injustice 

likewise  must,  unavoidably  ensue  with  regard  to  the  per- 
formance of  all  contracts  previously  agreed  on." 

Josiah  Quincy  wrote  to  Genl.  Washington,  November  27, 
1780 :  "  To  restore  the  credit  of  paper  by  making  it  a  lawful 
tender,  by  regulating  acts,  or  by  taxes,  are  political 
maneuvres  that  have  already  proved  abortive,  and  for  this 
obvious  reason,  that,  in  the  same  proportion  as  ideal  money 
is  forced  into  currency,  it  must,  from  the  nature  of  every 
thing  fraudulent,  be  forced  out  of  credit.  I  have  said  '  from 
the  nature  of  every  thing  fraudulent?  because  I  am  firmly 
of  the  opinion,  and  think  it  entirely  defensible,  that  there 
never  was  a  paper  pound,  a  paper  dollar,  or  a  paper  promise 
of  any  kind  that  ever  yet  obtained  a  general  currency  but 
by  force  or  fraud ;  generally  by  both." 

Theories  of  law,  which  would  sustain  the  constitutionality 
of  these  issues  of  legal  tender  notes — put  out  in  unnecessary 
volume,  and  causing  a  suspension  of  specie  payments— ap- 
pear to  be  of  most  dangerous  tendency.  Even  when  gold 
was  down  to  twenty-one  per  cent,  premium,  the  Secretary 
refused  or  neglected  to  put  his  loans  on  the  market,  call  in 
his  issues  of  green  backs,  and  maintain  the  legal  tender  cur- 
rency so  near  the  value  of  coin.  And  it  is  a  standard  of 
value  or  currency  thus  regulated  which,  our  courts  are  re- 
quested to  sanction ! 

Even  that  publicity  of  the  quantity  of  his  issues,  which  is 
usual  in  other  countries,  and  which  he  insists  upon  exacting 
from  the  banks — page  21 — has  been  withheld.  The  four- 
teenth section  of  the  Act  of  Congress,  approved  December 
23,  1857,  makes  it  the  duty  of  the  Secretary  of  the  Treasury 


53 

to  cause  a  statement  to  be  published  monthly  of  the  amount 
of  treasury  notes  issued  and  paid  or  redeemed,  showing  the 
amount  outstanding  each  month.  This  section  has  been  re- 
enacted  in  every  bill  to  provide  Ways  and  Means,  and  as 
recently  as  the  3d  of  March  last.  Why  has  the  Secretary  of 
the  Treasury  not  complied  with  it  ?  ISTo  one  can  deny  the 
utility  of  such  a  statement.  It  would  be  a  guide  to  the 
various  fluctuations  in  the  rise  and  fall  of  the  precious  metals 
to  every  person  engaged  in  active  pursuits,  and  enable  our 
own  people  to  shape  their  business  so  as  to  avoid  losses, 
which,  in  the  absence  of  such  intelligence,  they  are  com- 
pelled to  suffer,  generally  to  the  profit  of  foreign  bankers, 
whose  sources  of  information  at  the  seat  of  government  are 
too  often  better,  in  the  absence  of  publicity,  than  those  ac- 
cessible to  our  own  people.  It  has  always  been  a  feature  of 
despotic  governments  to  withhold  information  from  the  pub- 
lic, but  as  favorites  can  obtain  such  information  indirectly, 
the  only  effect  of  such  a  course  is  to  place  the  whole  com- 
munity at  the  mercy  of  the  favorites  of  government. 

The  steady  advance  in  the  price  of  gold  is  wholly  in  con- 
sequence of  the  inflation  of  the  currency;  for  bullion,  like 
all  other  commodities,  becomes  dear  in  proportion  as  the  cir- 
culating medium — like  an  extravagant  issue  of  paper  money 
which  supplants  it — is  rendered  abundant  and  cheap.  An 
excessive  issue  of  paper  money  acts  upon  prices  of  bullion, 
and  all  other  commodities,  precisely  as  if  the  coined  money 
were  reduced  in  value,  which  was  the  fraudulent  course  pur- 
sued by  the  governments  in  the  dark  ages ;  when  pressed  for 
money,  they  called  in  all  the  coin  they  could  procure,  and, 
in  the  peculiar  phraseology  of  those  times,  they  proclaimed 
"  a  rise  in  the  standard,"  making  a  smaller  quantity  of  pure 
metal  in  each  piece.  Some  of  the  current  coins  in  Europe 
have  thus  been  reduced  to  a  fifth  or  sixth  of  the  quantity  of 
pure  metal  which  they  once  contained. 

It  is  supposed  that  an  excessive  inflation  of  paper  money 
not  only  reduces  the  rate  of  interest  but  also  keeps  up  the 
prices  of  government  securities.  In  the  case  of  England, 


before  the  bank  suspended  cash  payments,  in  1793,  the 
government  three  per  cent,  stock  sold  at  ninety-five,  and  in 
1797,  after  the  suspension,  having  depreciated  more  than 
fifty  per  cent.,  it  sold  at  forty-six,  in  the  depreciated  currency, 
while  the  loans  negotiated  during  the  suspension  of  cash 
payments  were  at  very  heavy  discounts.  In  our  own  case 
we  see  government  stocks  (five-twenty  bonds),  at  "  par,"  al- 
though the  high  premium  on  gold  secures  the  equivalent  of 
nine  per  cent,  per  annum  interest  upon  them ;  and  gold 
being  at  fifty  premium,  the  five-twenties  really  bring  the 
government  only  sixty-six  in  coin,  or  its  equivalent. 

In  New  York  the  rate  of  interest,  having  fluctuated  v<*ry 
much,  has  recently  advanced  to  as  high  a  point  as  it  usually 
attains  under  a  specie  currency;  and  in  the  case  of  all  infla- 
tions of  paper  money,  the  demand  for  money  during  the  in- 
crease of  prices,  tends  to  keep  up  the  rate  of  interest  to  the 
highest  point.  Hence  the  constant  demand  for  more  issues 
of  paper  which  prevails  at  such  periods,  the  advocates  of 
further  issues  contending  that  the  high  rate  of  interest  is 
positive  proof  of  the  necessity  for  creating  more  and  more 
paper  money. 

In  addition  to  what  has  already  been  said  of  the  impor- 
tance and  utility  of  a  specie  currency,  it  may  be  observed 
that  as  a  protection  to  home  industry — as  a  permanent 
measure  of  value  for  the  wages  of  labor — it  is  preeminently 
desirable.  It  has  unfortunately  been  too  often  the  case,  that 
all  our  efforts,  as  a  people,  to  organize  profitable  systems  of 
home  industry  have  been  defeated  by  paper  currencies, 
which,  have  made  us,  by  their  inflations,  incapable  of  supply- 
ing ourselves  with  many  descriptions  of  manufactured  goods 
for  which  we  needed  no  other  protection  than  that  found  in 
a  sound  and  uniform  currency.  The  losses  through  bank- 
ruptcy and  unfortunate  speculations,  created  or  fostered  by 
our  paper  currencies,  have  been  frightful ;  and  if  it  should 
prove,  as  the  Secretary  seems  to  desire,  that  the  rebellion 
of  1861  shall  be  the  means  of  securing  to  the  American 
people  a  sound  and  permanent  currency,  I  do  not  hesitate  to 


55 

say  that  it  will  have  been  cheaply  purchased  by  a  national 
debt  of  even  two  thousand  millions  of  dollars;  but  the 
deplorable  loss  of  life,  incident  to  the  struggle  is  a  terrible 
calamity  for  which  the  wicked  authors  of  the  rebellion  will 
be  held  infamous  throughout  all  time.  Those  of  our  people 
who  have  sacrificed  their  lives  in  defence  of  the  country  and 
the  union,  have  bequeathed  to  their  posterity  a  legacy  above 
all  price,  and  I  trust  that  in  addition  to  pensions  to  their 
surviving  families,  or  dependents,  "a  merit  roll  of  freedom" 
will  be  established  at  an  early  day,  on  which  their  names 
may  be  inscribed,  and  their  memory  perpetuated,  not  only 
in  the  records  of  the  government  at  Washington,  but  in  the 
records  of  the  states,  cities,  towns  and  wards  from  which 
they  volunteered. 

I  remember  with  what  patriotic  gratification  a  very  near 
relative  cherished  the  recollection  of  his  having  served  in 
the  war  of  the  Kevolution  ;  and  had  he  transmitted  no  other 
memento  than  this  to  his  posterity,  it  alone  would  have 
been  sufficient  to  constitute  a  legacy  of  patriotic  renown 
more  valuable  than  tfce  greatest  estates,  or  the  richest 
treasures  of  gold  and  silver.  So  it  will  be  with  every  man, 
and  the  relatives  or  descendants  of  every  man,  who  has 
taken  part  in  the  present  struggle  for  our  national  life :  that 
service  will  be  enough  to  immortalize  him  ;  for  out  of  the 
toils  and  trials  of  this  great  calamity,  there  is  to  my  mind 
no  reasonable  doubt  that  our  country  will  emerge,  regen- 
erated and  disenthralled,  to  enter  upon  a  new  career  of 
prosperity  and  greatness,  under  the  blessing  of  Providence, 
far  surpassing  anything  known  in  our  past  history,  glorious 
as  that  has  been.  Unhappily  for  us,  the  administration  of 
our  government  was,  in  many  departments,  in  hands  wholly 
inexperienced,  but  I  believe  patriotic ;  and  the  wicked  con- 
spirators against  our  nationality  calculated,  doubtless,  that 
this  very  inexperience  would  prove  advantageous  to  their 
schemes,  as  it  has  to  some  extent,  but  what  the  administration 
has  lacked  in  skill,  has  been  more  than  made  up  by  the 
patriotism  of  the  people  and  the  personal  integrity  of  the 


56 

President  himself.  We  happily  soon  got  rid  of  the  early 
mismanagement  of  the  "War  Department,  and  it  may 
be  hoped  that  the  Treasury  Department  and  the  finan- 
ces will  yet  be  brought  back  to  what  the  teachings  of  skill 
and  the  dictates  of  patriotism  require.  It  cannot  be  dis- 
guised, however,  that  the  administration  has  been  unduly 
sensitive  to  criticism,  and  in  dealing  with  citizens  who 
differed  with  them  as  to  the  best  mode  of  conducting  the 
government,  there  have  been  manifested,  too  often,  intoler- 
ant sentiments,  particularly  in  classing  dissentients  from 
government  policy  as  sympathizers  with  the  infamous  rebels. 
Party  spirit  and  party  prejudices  have  been  fomented  by 
the  distribution  of  patronage,  men  of  undoubted  patriotism 
having  been  proscribed  for  difference  of  political  opinion. 
It  was  unhappily  true  that  the  majority  of  the  rebel  leaders 
had  been  the  companions  and  associates  of  the  opposition 
party  in  the  lo}^al  States.  But,  in  1861,  at  the  breaking  out 
of  the  rebellion,  party  ties  were  disregarded  by  all  promi- 
nent citizens  of  the  loyal  States.  We  were  all  united  in 
April,  1861,  when  the  conspirators,  seized  Fort  Sumter. 
The  divisions  that  have  since  sprung  up,  may  in  great 
measure  be  traced  to  the  attempt  to  administer  the  Govern- 
ment upon  partizan  principles,  the  turning  out  of  office 
of  brothers  or  fathers  of  men  serving  in  the  army,  the  re- 
moval of  faithful  officers,  to  make  room  for  partizans,  and 
appeals  to  the  cupidity  of  mankind  in  the  distribution  of 
official  patronage,  to  secure  partizan  support  to  individuals 
high  in  the  management  of  national  affairs.  Among  the 
wonderful  incidents  of  the  time,  none  is  more  extraordinary 
than  the  number  of  foreign  missions,  executive  offices,  &c., 
lavished  upon  the  reporters  of  the  press,  "  those  gamins  and 
o-ood  fellows  of  literature ;  fellows  of  inexhaustible  resources, 
who  carry  their  wits  literally  at  their  fingers'  end,  and  who 
sketch  out  a  much  better  speech,  between  an  orator's  shoul- 
der blades,  than  he  is  making  in  front."  But  all  such  efforts 
to  bias  the  judgment  of  the  future  historian  will  fail;  the 
character,  capacity  and  official  acts  of  those  who  now  direct 


57 


the  affairs  of  state,  will  be  impartially  judged  by  posterity; 
for  party  prej  udices  will  soon  pass  away.  Augustus  Csesar 
thought  fit  for  his  interest  to  be  bountiful  and  grateful  to 
Virgil  and  Horace,  but  their  verses  have  not  saved  him  from 
those  just  reproaches  which  have  come  down  to  posterity. 
It  is  also  remarkable  how  active  a  part  was  taken,  how 
many  offices  'were  held,  during  the  French  Revolution,  by  a 
host  of  clamorous  writers,  of  vast  importance  in  their  day, 
whose  influence  and  notoriety,  and  those  of  their  patrons, 
were  soon  buried,  without  the  possibility  of  resuscitation. 

Our  suffering  country  will,  I  fondly  hope  and  trust,  sur- 
vive the  calamities,  the  errors,  the  passions  and  the  party 
prejudices  of  this  momentous  period.  To  save  it,  however, 
will  require  all  the  patriotism,  religion,  self-denial  and  zeal 
with  which  our  patriotic  fathers  carried  it  so  successfully 
through  the  ordeal  of  the  revolutionary  period.  Heroes, 
sages  and  statesmen,  who  knew  only  their  country's  good, 
made  that  period  illustrious  and  memorable.  This  period  of 
trial  has  established  the  gratifying  fact,  that  the  race  has  not 
degenerated.  Let  us  then  cherish  the  true  men  who  have 
come  forth  to  prove  themselves  worthy  of  being  our  leaders. 
Let  us  raise  higher  the  standards  of  public  favor,  and  stay 
the  tide  of  partizan  animosities  and  greed  of  gain  which 
threatens  to  overwhelm  us  in  corruption  and  ruin.  There 
are  higher  and  nobler  aims  than  personal  aggrandizement 
and  the  amassing  of  wealth  during  this  hour  of  national 
calamity,  and  it  is  the  duty  of  the  patriot,  whether  states- 
man, editor  or  clergyman,  to  direct  the  people  to  them.  The 
crisis  demands  fearlessness  in  every  man  whose  tongue  or 
pen  can  expose  the  dangers  of  those  material  considerations 
which  now  so  largely  engross  the  attention  of  official  circles, 
and  which  tend  so  much  to  demoralize  public  sentiment. 
Party  rancor  should  be  subdued,  and  the  fate  of  the  slave- 
holding  interest,  which  had  sought  so  long,  through  partizan 
organizations,  to  control  the  government — at  last  commiting 
political  suicide,  in  its  vain  attempts  at  continued  domina- 


58 

tioii  —  should  warn  all  parties,  seeking  their  own  material 
advancement  at  the  sacrifice  of  their  country's  welfare,  that 
a  people  who  can  endure  the  trials  of  the  present,  will  not 
suffer  a  recurrence  of  these  trials  from  the  same  cause.  '  By 
rising  to  higher  and  nobler  aspirations  than  those  which  are 
prompted  by  greed  of  gain,  our  public  men  will  find  them- 
selves endowed  with  a  larger  share  of  public  confidence,  and 
the  country  will  be  saved  from  those  encroachments  upon 
popular  liberty  and  free  institutions  which  are  dictated  by 
the  groveling  instincts  of  personal  gain  ;  for  the  highest  and 
noblest  form  of  human  selfishness  is  that  which  seeks  its  own 
renown  in  promoting  the  best  interests  of  the  people,  regard- 
less of  partizan,  sectional,  or  selfish  motives. 


YORK,  January  8th,  1864. 


WASHINGTON'S    OPINION   OF  PAPER  MONEY. 


Genl.  Washington  wrote  to  Lund  Washington  :  "  West 
Point,  August  17,  1779.  Sir — Some  time  ago  you  ap- 
plied to  me  to  know  if  you  should  receive  payment  of 

Genl.   M 's  bonds,  and  of  the   bond   due  from   the 

deceased   Mr.  M — 's    estate    to    me ;    and   you   were, 

after  animadverting  a  little  upon  the  subject,  authorized 
to  do  so.  Of  course  I  presume  the  money  has  been  re- 
ceived. I  have  since  considered  the  matter  in  every  point 
of  view  in  which  my  judgment  enables  me  to  place  it, 
and  arn  resolved  to  receive  no  more  old  debts  (such,  I  mean, 
as  were  contracted  and  ought  toliave  been  paid  before  the 
war)  at  the  present  nominal  value  of  the  money,  unless  com- 
pelled to  do  it,  or  it  is  the  practice  of  others  to  do  it.  Nei- 
ther justice,  reason,  nor  policy  requires  it.  The  law,  un- 
doubtedly, was  well  designed.  It  was  intended  to 'stamp  a 


59 

value  upon,  and  to  give  a  free  circulation  to,  the  paper  bills 
of  credit;  but  it  never  was,  nor  could  have  been,  intended 
to  make  a  man  take  a  shilling  or  sixpence  in  the  pound  for 
a  just  debt,  which  his  debtor  is  well  able  to  pay,  and  thereby 
involve  himself  in  ruin.  I  am  as  willing  now  as  I  ever  was 
to  take  paper  money  for  every  kind  of  debt,  and  at  its  pre- 
sent depreciated  value,  for  those  debts  which  have  been  con- 
tracted since  the  money  became  so ;  but  I  will  not  in  future 
receive  the  nominal  sum  for  such  old  debts  as  come  under 
the  above  description,  except  as  before  specified. 

"The  fear  of  injuring,  by  any  example  of  mine,  the  credit 
of  our  paper  currency,  if  I  attempted  to  discriminate  between 
the  real  and  nominal  value  of  paper  money,  has  already  sunk 
for  me  a  large  sum,  if  the  bonds  before  mentioned  are  paid 
off;  the  advantage  taken  in  doing  which  no  man  of  honor  or 
common  honesty  can  reconcile  to  his  own  feelings  or  con- 
science ;  not  as  respects  me,  do  I  mean,  but  transactions  of 
this  kind  generally.  The  thing  which  induces  me  to  men- 
tion the  matter  to  you  at  present  is,  the  circumstance  you 
have  related  respecting  the  wages  of  Roberts,  which  you 
say,  according  to  his  demands,  will  amount  to  upwards  of 
two  thousand  pounds,  and  come  to  as  much,  for  the  service 
of  a  common  miller  for  one  year  only,  as  I  shall  get  for  six 

hundred  acres  of  land  sold  to  M in  the  best  of  times, 

and  the  most  valuable  part  of  Virginia,  that  ought  to  have 
been  paid  for  before  the  money  began  to  depreciate ;  nay, 
years  before  the  war.  This  is  such  a  manifest  abuse  of  rea- 
son and  justice,  that  no  arguments  can  reconcile  it  to  common 
sense  or  common  honesty.  Instead  of  appealing  to  me,  who 
have  not  the  means  of  information  or  knowledge  of  common 
usage  and  practice  of  matters  of  this  kind  in  the  State,  or 
the  laws  that  govern  there,  I  wish  you  would  consult  men  of 
honor,  honesty  and  firm  attachment  to  the  cause,  and  govern 
yourself  by  their  advice  or  by  their  conduct.  If  it  be 
customary  with  others  to  receive  money  in  this  way — that  is, 
sixpence  or  one  shilling  in  the  pound  for  old  debts ;  if  it  is 
thought  to  be  promotive  of  the  great  cause  we  are  embarked 


60 

in  for  individuals  to  do  so,  thereby  mining  themselves  while 
others  are  reaping  the  benefit  of  such  distress ;  if  the  law 
imposes  this,  and  it  is  thought  right  to  submit,  I  will  not  say 
aught  against  it,  nor  oppose  another  word  to  it.  No  man 
has  gone,  and  no  man  will  go,  further  to  serve  the  public 
than  myself.  If  sacrificing  my  whole  estate  would  effect  any 
valuable  purpose,  I  would  not  hesitate  one  moment  in  doing 
it.  But  my  submitting  in  matters  of  this  kind,  unless  the 
same  is  done  by  others,  is  no  more  than  a  drop  in  the  bucket- 
In  fact,  it  is  not  serving  the  public,  but  enriching  individuals 
and  countenancing  dishonesty ;  for  sure  I  am  that  no  honest 
man  would  attempt  to  pay  twenty  shillings  with  one,  or  per- 
haps half  of  one.  In  a  word,  I  had  rather  make  a  present 
of  the  bonds  than  receive  payment  of  them  in  so  shameful 
a  wa}T.  I  am,  &c. 


Genl.  Washington  wrote  to  President  Reed,  August  22, 
1779 :  "  Perhaps  I  do  not  understand  what  they  mean  by 
using  the  sponge.  If  it  be  to  sink  the  money  in  the  hands 
of  the  holders  of  it,  and  at  their  loss,  it  cannot,  in  my  opinion, 
Btand  justified  upon  any  principles  of  common  policy,  com- 
mon sense,  or  common  honesty." 


Genl.  Washington  wrote  to  Thomas  Jefferson,  August  1, 
1786 :  "  Genl.  McDougall,  who  was  a  brave  soldier  and  a 
distinguished  patriot,  is  also  dead.  He  belonged  to  the 
Legislature  of  his  State.  The  last  act  of  his  life  was  (after 
being  carried  on  purpose  to  the  Senate)  to  give  his  voice 
against  the  emission  of  a  paper  currency." 


Gen.  Washington  wrote  to  Thomas  Stone,  February  16, 
1787 :  "  I  contend  that  it  is  by  the  substance,  not  with  the 
shadow,  of  a  thing  we  are  to  be  benefited.  The  wisdom  of 
man,  in  my  humble  opinion,  cannot  at  this  time  devise  a 


61 

plan  by  which  the  credit  of  paper  money  would  be  long  sup- 
ported ;  consequently,  depreciation  keeps  pace  with  the 
quantity  of  the  emission,  and  articles  for  which  it  is  ex- 
changed rise  in  a  greater  ratio  than  the  sinking  value  of 
money.  "Wherein  then  is  the  farmer,  the  planter,  the  artizan 
benefited  ?  The  debtor  may  be,  because,  as  I  have  observed, 
he  gives  the  shadow  in  lien  of  the  substance,  and  in  propor- 
tion to  his  gain  the  creditor  or  the  body  politic  suffers. 
Whether  it  be  a  legal  tender  or  not,  it  will,  as  has  been  ob- 
served very  truly,  leave  no  alternative.  It  must  be  that  or 
nothing.  An  evil  equally  great  is,  the  door  it  immediately 
opens  for  speculation,  by  which  the  least  designing,  and  per- 
haps the  most  valuable  part  of  the  community  are  preyed 
upon  by  the  more  knowing  and  crafty  speculators." 


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